* Holiday market closures mute reaction to lacklustre China
* Surprisingly weak U.S. GDP data push dollar index to
* U.S. economy grew just 0.1 percent in Q1 vs 1.2 pct
* Smooth Fed meeting provides some solace to FX markets
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, May 1 The dollar crawled slightly
higher against a basket of major currencies on Thursday but
stayed close to a three-week low hit in the previous session,
when data showed the U.S. economy all but stalled in the first
With much of Asia shut for public holidays, and ahead of the
key U.S. jobs report on Friday, major currencies mostly stuck to
their recent ranges.
This light activity muted the impact of economic data from
China that fell slightly short of forecasts. China's official
Purchasing Managers' Index showed factory activity increased
marginally in April but export orders fell sharply, raising
fresh doubts about whether the world's second-largest economy
"On days like this, you get a lot people playing the range,
and if it breaks to either side, you can get a big stop-fest,"
said Bart Wakabayashi, head of forex at State Street Global
Markets in Tokyo.
Against the yen, the dollar traded at 102.29 yen, up
about 0.1 percent on the day after suffering a 0.4 tumble in the
previous session. Many stop-loss orders were placed around
102.80 yen to 103 yen on the upside, and 101.90 yen to 101.70
yen on the downside, market participants said.
The dollar index added about 0.1 percent to 79.519,
after skidding 0.4 percent on Wednesday after data showed the
United States grew at an annualised pace of just 0.1 percent in
the first quarter.
While the result was well below even the most pessimistic
forecast, it did not deter the Federal Reserve from reducing its
bond-buying support by another $10 billion a month as expected.
"The statement issued after the FOMC meeting had only
minimal changes," analysts at Nomura wrote in a note to clients.
"The committee noted that growth slowed 'sharply' over the
winter, acknowledging implicitly the GDP report. But the
committee also noted that economic activity 'picked up
The Fed's relatively upbeat outlook helped calm the forex
market somewhat, and gave stock investors a reason to drive the
Dow to a record closing high.
Pressure on the greenback helped the euro bounce from a
three-week trough of $1.3770 on Wednesday, to buy $1.3870
in Asia, steady on the day.
The euro's overnight rebound came even after eurozone price
data missed expectations. Data showed inflation picked up
slightly to 0.7 percent in April from 0.5 percent, undershooting
the 0.8 percent consensus.
Analysts said the result was probably not enough to spur a
reluctant European Central Bank to ease policy at next week's
meeting, although many suspect the ECB will eventually have to
act to counter the threat of deflation.
"The modest downside surprise does not materially change the
outlook for ECB in the May or June meetings," JPMorgan analysts
wrote in a note to clients.
"The possibility of some action in these meetings is perhaps
only modestly higher, but the action, if any, will be
incremental and thus still slightly bearish for EUR/USD heading
into ECB next week."
(Editing by Shri Navaratnam and Eric Meijer)