October 30, 2009
The dollar fell against most major currencies on Thursday as U.S. economic growth was stronger than expected in the third quarter.
Real gross domestic product (GDP) grew a 3.5 percent annual rate in the third quarter, stronger than most expectations, according to the U.S. Commerce Department. It was the first increase after four quarters of contraction. The report indicated that U.S. has emerged from its longest and deepest recession in the post-war period.
"This welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered," said Christina Romer, Chair of Council of Economic Advisors.
The strong data overstated the strength of the recovery because of temporary factors including the "cash-for-clunkers" program, the tax incentives for first-time homebuyers and the big swing in the inventories, said analysts of Global Insight.
High unemployment rate, weak consumer spending, and tight credit remain key hurdles to a full recovery. A growth relapse is expected in the next few quarters, though not into negative territory.
Senators agreed Wednesday to extend the tax credit for first-time home buyers and to offer a reduced credit to some repeat buyers. Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan gave their support to the extension on Thursday.
The credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide, Geithner and Donovan said in a statement.
The euro has been sliding in previous sessions as weak economic reports hurt hopes for recovery. The single currency rebounded on Thursday as risk appetite picked up.
The euro bought 1.4845 dollars in late New York trading compared with 1.4719 dollars it bought late Wednesday. The pound rose to 1.6548 dollars from 1.6413 dollars.
The dollar fell to 1.0662 Canadian dollars from 1.0790 Canadian dollars, and fell to 1.0181 Swiss francs from 1.0261 Swiss francs. It rose to 91.49 Japanese yen from 90.79 Japanese yen.