Dollar on defensive, eyes on GDP
The dollar eked out small gains against the euro in early trade on Friday, but remained on the defensive near a three-month low against a basket of currencies on concerns U.S. growth may be disappointingly weak.
Dollar bears think U.S. second quarter GDP data due at 8:30 p.m. EDT could provide a further opportunity to sell the currency after a raft of U.S. economic data in the past month undershot market expectations.
Economists forecast U.S. growth to slow to 2.5 percent in the three months to June from 2.7 percent in the first quarter.
But some said market pessimism on the U.S. economy may have gone too far.
The dollar is coming under pressure due to worries about the U.S. economy. But we think today's GDP figures will be reasonably strong and thus limit downside for the dollar for now, said Masafumi Yamamoto, chief FX strategist at Barclays Capital in Tokyo.
The dollar stayed near a 12-week low against the euro, which benefited from a jump in euro-zone economic sentiment to a 28-month high and a decline in German unemployment.
The euro slipped 0.1 percent against the dollar in early Asian trade to $1.3060, though it is still not far from a 12-week high of $1.3107 marked on Thursday
The next key resistance level for the single currency is seen at $1.3125, the 38.2 percent Fibonacci retracement of the peak-to-trough move from November 2009 to June.
On Thursday, the dollar slipped against both high-yielding currencies such as the Australian dollar, as well as currencies that tend to be favoured when risk appetite wanes, such as the Swiss franc and the yen.
The Australian dollar slipped 0.1 percent in early Asian trade to $0.8993, but not far from an 11-week high of $0.9060 hit earlier in the week.
The dollar slipped 0.1 percent versus the yen to 86.74 yen, edging toward a 7 1/2-month low of 86.27 yen hit earlier in the month.
The yen showed no response to an unexpected fall in Japanese industrial production. The market also shrugged off the news that a group of Japanese lawmakers called for the BOJ to set an inflation target of two to three percent.
The Swiss franc rose 0.1 percent, building on the 1.5 percent gain it made on Thursday. The franc rose to 1.0402 franc per dollar.
(Reporting by Hideyuki Sano; Editing by Joseph Radford)
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