NEW YORK (Reuters) - The dollar slipped against a basket of currencies on Friday as data showing the U.S. economy rang up its strongest quarter in nearly four years failed to erase worries that trade frictions would be a drag in the second half of 2018.
The euro stabilized following its biggest one-day loss in a month in reaction to the European Central Bank on Thursday reaffirming its plan to slowly end its accommodative monetary policy.
The greenback’s earlier gains faded after the U.S. government reported gross domestic product grew at a 4.1 percent annualized pace in the second quarter, accelerating from a revised 2.2 percent clip in the first three months of the year.
After hints from U.S. President Trump and other government officials in recent days of a strong GDP reading for the second quarter, “the market is well versed in a strong number,” said Alan Ruskin, global head of currency strategy in Deutsche Bank in New York.
The GDP, while strong on an annualized basis, was less impressive on a year-over-year basis, coming in at 2.8 percent. This was slower than an expected 3.1 percent pace, Ruskin said.
While the latest reading may be less stellar than it first appeared, it provided solid fundamentals to own dollars.
“I believe that the current steady nature of our economy is preventing the greenback from sinking,” said Juan Perez, senior currency trader at Tempus Consulting in Washington.
The latest GDP figure also reinforced the notion that the Federal Reserve would further raise interest rates, which is also a positive for the dollar.
“This number is very supportive the Fed’s outlook for four rate hikes in 2018,” said Minh Trang, senior foreign currency trader at Silicon Valley Bank in Santa Clara, California.
An index that tracks the dollar versus the euro, yen, sterling and three other currencies .DXY was down 0.09 percent at 94.662, paring its weekly gain to 0.2 percent.
The single currency steadied after falling more than 0.7 percent on Thursday in response to the ECB sticking to ending its 2.6 trillion euro stimulus program this year and keeping rates at a record low level through the summer of 2019.
The yen firmed against the euro and dollar in advance of Bank of Japan’s two-day policy meeting that begins on Monday in the wake of reports last week that policy-makers may to make its massive stimulus program more sustainable.
China's yuan was heading for its longest weekly losing streak since November 2015. It CNY= fell to a 13-month low at 6.8369 per dollar as the Chinese currency has been under sustained pressure since Trump threatened to impose tariffs on all imports from China.
Additional reporting by Tom Finn in LONDON; Shinichi Saoshiro in TOKYO; Editing by Andrew Bolton and Meredith Mazzilli