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Dollar Surges, Bonds Stable |
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Dollar climbs, Treasuries mixed - May. 26, 2005
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Dollar surges, bonds stable
Greenback rallies to new 7-month high against euro on upward revision to first-quarter
GDP growth.
May 26, 2005: 10:19 AM EDT
NEW YORK (CNN/Money) - The dollar surged to a new seven-month high against the
euro Thursday after the government said the economy grew faster in the first quarter
than had been earlier estimated.
Bonds were stable on the report.
The euro bought $1.2542, down from $1.2602 late Wednesday, while the dollar bought
¥108.04, up from ¥107.72 in the previous session.
The dollar soared after the government revised first-quarter real GDP growth to an annual rate
of 3.5 percent, versus the initial reading of 3.1 percent. The new figure was slightly below the
consensus analyst estimate of 3.6 percent.
"This is a solid (GDP) release and should support the dollar's gains from earlier this morning,"
Lara Rhame, currency strategist at CSFB, told Reuters.
Faster GDP growth is an indication of an expanding economy, which could lead the Federal
Reserve to raise interest rates. Rising interest rates generally help the dollar as they make
dollar-denominated securities more attractive to foreign investors.
Furthermore, the dollar has benefited as investors seek to capitalize on rising rates in the
United States and sluggish growth in Europe.
"Near-term pressure on the euro is to be expected....We've seen earlier on this morning the
euro coming under renewed pressure on fears with regard to the referendum at the weekend
in France," Ian Stannard, senior foreign exchange strategist at BNP Paribas in London, told
Reuters, referring to concerns that France will reject the new European Union constitution in a
referendum scheduled for Sunday.
Meanwhile, the revised GDP figure had little impact on bonds, which were mixed.
The benchmark 10-year Treasury note was unchanged from Wednesday at 100-9/32, yielding
4.09 percent. The 30-year bond edged higher one tick to 114-14/32, to yield 4.42 percent,
down from 4.43 percent the previous session. Bond prices and yields move in opposite
http://cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&title=Dollar+climbs%2C+Tr... 5/26/2005
Dollar climbs, Treasuries mixed - May. 26, 2005
Page 2 of 2
directions.
Prices for the five-year note fell 1/32 of a point to 100-7/32, yielding 3.82 percent, and the two-
year note remained almost unchanged at 99-24/32, yielding 3.61 percent.
Overall, Treasury prices were stable, which suggests the upward revision to economic growth
had already been priced into the market.
An upward revision had been expected since the government reported a better-than-expected
trade gap in March. Purchases of imported goods and services reduce GDP, while exports
increase the measure of a nation's economic activity.
-- from staff and wire reports
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Find this article at:
http://money.cnn.com/2005/05/26/markets/bondcenter/bonds/index.htm
Check the box to include the list of links referenced in the article.
http://cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&title=Dollar+climbs%2C+Tr... 5/26/2005
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