Dollar Hits The Skids As Recovery Hopes Rise

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The dollar plummeted across the board versus major counterparts on Friday as traders expressed increased risk appetite after a report showed that the US economy contracted less than analysts were predicting.

The report fueled hopes that the world's biggest economy could lead the world out of the worst recession in decades, and sooner than once feared.

Traders had been hedging of late, refusing to go all-in on the prospect of a global recovery beginning by year's end. However, with stocks on the rise and a number of key indicators showing a faint pulse in the housing and labor markets, the dollar could be in for some big losses to higher-yielding counterparts.

Its already been a rough month for the dollar versus resource-linked currencies, and the euro and sterling joined the buck-bashing party on Friday.

The dollar tumbled to 1.4270 versus the euro, giving back all of its gains from earlier in the week. With the loss, the dollar moved within a penny of its 2009 lows.

The dollar plunged from a month-long trading range versus the sterling, slipping to a 4-week low of 1.6732 before finding support. Back in June, the dollar hit a 2009 low of 1.6744.

Even the yen battered the dollar on Friday. The buck slipped to 94.58 by mid-day after challenging a monthly high near 96 in the previous session.

Versus the loonie, the dollar dropped to C$1.0762, coming within a hair of Monday's 10-month low of C$1.0749. The U.S. economy continued to shrink in the second quarter, according to new government statistics released Friday, although the pace of contraction slowed by more than economists had been expecting.

The U.S. Commerce Department revealed that Gross Domestic Product, a closely watched measure of broad economic performance, fell at a pace of 1 percent for the second quarter. Economists had expected GDP to fall at a 1.5 percent rate.

And while the Institute for Supply Management - Chicago released a report on Friday showing a continued contraction in manufacturing activity in the month of July, the pace of contraction slowed by a little more than economists had been expecting.

North of the border, Canadian real gross domestic product (GDP) decreased 0.5% in May, a faster rate of decline than in the previous three months, according to data released Friday by Statistics Canada.

Economist were looking for GDP to fall 0.3% in May.

(Market News Provided by RTTNews)