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

Published 31/07/2015, 01:53 am
© Reuters.  FOREX-Dollar gains as U.S. growth supports rate-hike view
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* U.S. Q2 GDP data supports view on Fed rate hike

* Greenback gains against major currencies

* FT report on IMF raises doubt about Greece bailout (Updates trading with FT report on IMF/Greece)

By Richard Leong

NEW YORK, July 30 (Reuters) - The dollar rose to its highest in a week against a basket of currencies 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 felt 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 policymakers next meet in September. ID:nL1N1092AW

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

The dollar index .DXY rose 0.6 percent to 97.545 after touching 97.665, its highest in a week. The greenback strengthened against major currencies following the second-quarter GDP news.

It was up 0.3 percent at 124.33 yen JPY= , while the euro shed 0.5 percent to $1.0925 EUR= .

The euro faced further selling pressure on a Financial Times report that said the International Monetary Fund couldn't officially join bailout talks with Greece until the debt-laden 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 and Australian dollar AUD=D4 were down 0.6 percent and 0.2 percent at $1.0325 and $0.7280, respectively. The New Zealand dollar NZD=D4 fell 1 percent to $0.6590.

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