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FOREX-Dollar climbs as U.S. growth supports rate-hike view

Published 31/07/2015, 05:39 am
© Reuters.  FOREX-Dollar climbs as U.S. growth supports rate-hike view
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* U.S. GDP data bolsters expectations of 2015 rate hike by Fed

* Greenback gains against major currencies

* Dollar hits 7-week high against yen before retreating

* FT report on IMF raises doubt about Greece bailout (Updates market action to late U.S. trading)

By Richard Leong

NEW YORK, July 30 (Reuters) - The dollar rose to a one-week high against a basket of currencies on Thursday as news of faster U.S. economic growth in the second quarter supported expectations that the U.S. Federal Reserve will raise interest rates as early as September.

The government's first assessment of gross domestic product growth in the second quarter was 2.3 percent, swifter than a revised 0.6 percent in the first quarter but lower than the consensus 2.6 percent forecast of analysts polled by Reuters. ID:nLNNUIEBDP

The data followed the Federal Reserve's statement on Wednesday, which some traders saw as bullish for the greenback. Fed policymakers said they thought the economy had overcome a first-quarter slowdown and was expanding moderately, with "solid job gains" in recent months. That left the door open for a possible rate hike when they next meet in September. ID:nL1N1092AW

"The latest GDP report confirms the Fed's narrative that the first-quarter weakness was transitory," said Ian Gordon, G10 currency strategist at Bank of America Merrill Lynch (NYSE:BAC) in New York. "The bar for them to hiking rates is not very high."

The dollar index .DXY was up 0.5 percent at 97.496 after touching 97.773, its highest in a week.

The greenback rose to a seven-week peak of 124.58 yen before retreating to 124.12 yen, up 0.2 percent on the day JPY= .

The euro shed 0.5 percent to $1.0925 EUR= after hitting an one-week low at $1.0894.

The euro faced further selling pressure on a Financial Times report that said the International Monetary Fund could not officially join bailout talks with Greece until the debt-burdened nation agrees to comprehensive reforms. ID:nL1N10A22K

While recent economic data has raised the chances of a U.S. rate increase, some analysts caution that Greece's unresolved debt woes and turmoil in China's financial markets may worsen, forcing the Fed to postpone a rate hike in September.

"It's not a done deal, but we are still of the view that a September (rate hike) liftoff is on the cards, contingent on the view that the data out of the U.S. continues to be firm," said Sue Trinh, RBC Capital Markets' senior currency strategist in Singapore.

The dollar's renewed strength put pressure on commodities prices and currencies closely linked to them.

The Canadian dollar CAD=D3 was down 0.5 percent at $1.3005, and Australian dollar AUD=D4 dipped 0.1 percent at $0.7291. The New Zealand dollar NZD=D4 fell 0.9 percent to $0.6601.

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