The U.S. dollar fell on Friday, notching a decline of more than 1% against the Japanese yen, as weaker-than-expected first-quarter GDP growth spurred fresh bets that the Federal Reserve is unlikely to pull back on its super-loose policies in the short term.
The U.S. economy grew more slowly than expectedin the first quarter, expanding 2.5% versus expectations of a 3.2% rise. A decrease in government spending and a rise in imports hurt growth, according to the Commerce Department.
“The softer-than-expected reading has helped investors maintain the view that quantitative easing will be around for a bit longer than they first expected,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.
The Federal Reserve currently buys $85 billion in mortgage and Treasury debt per month through its quantitative-easing program, and officials discussed an eventual tapering at the last Federal Open Market Committee meeting. That discussion may have been a bit premature, especially in light of low inflation and weak employment data, said Eric Viloria, senior currency strategist at Forex.com.
The FOMC will begin its next two-day meeting on Tuesday.
The ICE dollar index , a measure of the greenback against a basket of six other currencies, fell to 82.484 from 82.813 late Thursday.
However, the WSJ Dollar Index, a gauge of the currency against a broader basket, rose to 73.65 from 73.47 on Thursday.
The dollar fell more than 1% against the Japanese yen, exchanging hands at ¥98.11 compared with ¥99.34 late on Thursday. The dollar dipped as low as ¥97.84 on Friday.
The dollar remained lower after the Bank of Japan, as expected, held off on any new policy moves, with the decision following major new easing initiatives outlined by the central bank earlier this month.
The Japanese central bank under Gov. Haruhiko Kuroda on Friday said it “will conduct money-market operations so that the monetary base will increase at an annual pace of about 60 [trillion]-70 trillion yen,” or about $610 billion to $710 billion, unchanged from its previous target.
“Our view is that the statements Kuroda made today represent a commitment for the long haul. There’s no reason to think the BOJ is going to do anything but what they’ve said,” according to Andrew Barber, chief executive officer of Waverly Advisors.
The yen found some strength earlier Friday after Japan’s Finance Ministry said consumer prices fell in March from the year-earlier period. The core consumer price index, which strips out volatile prices for fresh food, declined 0.5%, slightly worse than the 0.4% decline expected in separate Dow Jones Newswires and Reuters surveys of economists.
The dollar is also weaker against the yen because of U.S. Treasury yields, which fell across the board on Friday.
“It [the greenback] is weakest against the yen today, because yields are lower and there’s a strong relationship between U.S. Treasury yields and the dollar-yen pair,” said Forex.com’s Viloria, who also noted the BOJ comments.
The Bank of Japan in early April unveiled a massive stimulus program to combat deflation that has been hurting the economy for more than 15 years.
The British pound also furthered its gains against the greenback, changing hands at $1.5484 compared with $1.5431. The pound rallied more than 1% on Thursday after a better-than-expected reading on first-quarter economic growth showed the U.K. avoided slipping into yet another recession.
The euro bought $1.3032 on Friday, up from $1.3001. On Thursday, the shared currency fell after Bundesbank President Jens Weidmann sent a confidential letter to Germany’s high court criticizing Outright Monetary Transactions. The OMT bond-buying program allows the European Central Bank to step in to buy the debt of governments that apply for help from Europe’s rescue fund.
The Australian dollar fetched $1.0278 compared with $1.0284 on Thursday.
Marketwatch
