* Upbeat U.S. Q2 GDP partly offset by dovish comments from
* Dollar still firmer across the board, but off peaks
* Nonfarm payrolls, PMI reports for China & euro zone next
By Ian Chua
SYDNEY, July 31 The U.S. dollar held below a
10-month peak against a basket of major currencies early on
Thursday, having soared at first on upbeat growth data only to
have a dovish Federal Reserve take some steam out of the rally.
The dollar index last traded at 81.422 after rising
as far as 81.545 - a high last seen in mid-September. Still, the
index is up more than 2 percent so far this month, on track for
its biggest monthly gain in over a year.
Dollar bulls took heart after the U.S. economy rebounded
sharply in the second quarter, with gross domestic product (GDP)
motoring at a 4.0 percent annualised pace.
That outcome was well above the 3.0 percent consensus and a
smart turnaround from a 2.1 percent contraction in the first
Despite that, the Fed gave no signs it was in a hurry to
raise interest rate. It delivered a slightly more upbeat
assessment on the economy and scaled back its monthly
bond-buying program by another $10 billion in a widely expected
"The accompanying statement was relatively dovish on the
labour market, with the Fed keen to retain the message that rate
hikes are some time away," said Spiros Papadopoulos, senior
economist at National Australia Bank in Melbourne.
Still, the two-year Treasury yield jumped to its
highest in over three years at 0.59 percent, which in turn
helped boost the allure of the U.S. dollar.
Against the yen, the greenback climbed to a four-month high
of 103.15, before steadying at 102.85 early in Asia. The
euro skidded to a near nine-month trough of $1.3366 but
recovered most of its losses to last stand at $1.3394.
Not helping the common currency, data showed annual
inflation in Germany slowed to 0.8 percent in July, an outcome
that pointed to another soft reading for EU-wide inflation due
out later in the day.
"We remain constructive on the USD and continue to run long
USD/JPY and short EUR/USD recommendations," analysts at Barclays
wrote in a note to clients.
The dollar also fared well against higher-yielding
currencies such as the Australian dollar, which plumbed a
two-month low of $0.9301 before edging back to $0.9324.
Traders expect markets to now take stock of the overnight
moves and wait for the next batch of key data including U.S.
employment on Friday. Manufacturing surveys in China and the
euro zone will also be closely watched.
Another month of healthy U.S. jobs growth will only embolden
dollar bulls, with markets continuing to look for signs of when
the Fed will eventually lift interest rates.
(Editing by Eric Meijer)