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FOREX-Euro shrugs off disappointing GDP data, data-hit dollar helps
August 15, 2014 / 2:36 AM / 3 years ago

FOREX-Euro shrugs off disappointing GDP data, data-hit dollar helps

* Euro survives GDP test but outlook still poor

* Dollar hit by lacklustre jobless claims, supports euro

* Weak Japan data foster bearish views for yen (Adds details, quotes)

By Ian Chua and Shinichi Saoshiro

SYDNEY/TOKYO, Aug 15 (Reuters) - The euro steadied on Friday, accepting soft euro zone inflation and disappointing growth data as keeping alive prospects of more stimulus from the European Central Bank.

Knocks taken by the dollar following the release of lacklustre weekly jobless claims on Thursday also underpinned the euro as the number of Americans filing new claims for unemployment benefits last week rose more than expected.

The common currency was little changed at $1.3363, having recovered from a brief dip to $1.3348. Still, it remained near a nine-month trough of $1.3333 and was on track to end lower on the week.

It was choppy against the yen, drifting to a 1-1/2 week high of 137.25 before slipping back under 137.00 for a nearly flat finish in New York. It was last at 136.93.

“The issue is, and this is hard to measure quantifiably, that traders were expecting the weakness,” said Christopher Vecchio, currency analyst at DailyFX, of the euro zone GDP data. Therefore, euro bears were left wanting more, he added.

Data on Thursday showed growth in the euro zone stalled in the second quarter, with Germany suffering a surprise contraction.

At the same time, inflation in the region was confirmed to have slowed to levels not seen since the height of the financial crisis nearly five years ago, leaving deflation a very real threat.

The dollar traded little changed at 102.49 yen, knocked down overnight from a nine-day high of 102.66 following the release of the weaker-than-expected U.S. jobless claims figures.

The greenback stood to gain about 0.4 percent against the yen this week although U.S. Treasury yields remained at low levels, with market watchers noting the emergence of bearish factors for the yen.

“Recent indicators out of Japan have been weak, like the unimpressive GDP, highlighting economic weakness in the second quarter. Until now further Bank of Japan easing was not considered a possibility but such views are starting to be challenged,” said Shinichiro Kadota, chief Japan FX strategist at Barclays Bank in Tokyo.

With the euro reluctant to move lower for now, the dollar index struggled to make much headway.

It was last at 81.612 after ending nearly flat in New York. However, the index was still within striking distance of an 11-month peak of 81.716 set last Wednesday.

Dollar bulls have been looking for fresh reasons to drive up the index after last month’s 2.1 percent rally - the biggest monthly gain in over a year.

Sterling pared some its losses to trade at $1.6684 but remained stuck within striking distance of the four-month low of $1.6657 it hit on Thursday after the Bank of England indicated that it is in no hurry to raise interest rates.

The pound has shed almost 3 percent since hitting a six-year high of $1.7192 in mid-July when hopes were high for the BOE to hike rates.

For near-term clues, market players kept an eye on whether the two-year gilt yield, which hit a two-month low of 0.662 percent on Thursday and helped drag sterling down, would decline further.

Britain will publish the second read on second-quarter gross domestic product at 0830 GMT. Economists polled by Reuters expected no revision from the 0.8 percent quarter-on-quarter expansion announced previously. (Editing by Shri Navaratnam and Eric Meijer)

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