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The U.S. dollar hit over 10-month highs against a basket of major currencies on Wednesday after stronger-than-expected U.S. gross domestic product data bolstered expectations for a more hawkish Federal Reserve.
U.S. GDP expanded at a 4.0 percent annual rate after shrinking at a revised 2.1 percent pace in the first quarter, the Commerce Department said Wednesday. Economists polled by Reuters had forecast a 3.0 percent growth rate in the second quarter after a previously reported 2.9 percent contraction.
'The risks are certainly there that the Fed becomes more hawkish, since the rebound in GDP was pretty substantial,” said Brian Daingerfield, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut.
The Fed is scheduled to release a statement at 2 p.m. EDT (1800 GMT) following the central bank's two-day policy meeting. The Fed is expected to cut its monthly bond-buying program by another $10 billion, and traders are watching closely for signs of an eventual hike in rates from rock-bottom levels.
Analysts said that, since the Fed will not be updating its economic forecasts and Chair Janet Yellen will not hold a news conference Wednesday, the upbeat GDP data would likely have a greater impact on the Fed's stance on monetary policy at its next policy meeting in September.
The strong GDP data overshadowed weaker-than-expected private-sector jobs data. The ADP National Employment Report showed U.S. companies hired 218,000 workers in July, below economists' expectations for a gain of 230,000 jobs, according to a Reuters poll.
Analysts said expectations were still optimistic for Friday's July non-farm payrolls growth. Economists expect U.S. employers to have added 233,000 jobs in July, according to a Reuters poll.
'There may be enough hiring in the state and local level to bring non-farm payrolls up to the optimistic consensus or maybe slightly higher,” said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Ltd in New York.
The U.S. dollar index, which measures the dollar against a basket of six major currencies, was last up 0.3 percent at 81.459, just under a 10-1/2-month high of 81.493 touched earlier in the session.
The euro was last down 0.25 percent against the dollar at $1.3375, just under a fresh eight-month low of $1.3371 hit earlier in the session. The dollar was last up 0.51 percent against the yen at 102.64 after hitting a two-month high of 102.73.
The dollar was up 0.31 percent against the Swiss franc at 0.9097 franc after hitting a six-month high of 0.9102 franc. U.S. government bond yields rose, with the benchmark 10-year note yield at 2.52 percent, from 2.46 percent late Tuesday.