The dollar fell in NY trading Friday as a government report showed the US economy contracted less than expected in Q2 2009. Private inventories declined sharply for a second quarter, making it likely that the Q3 2009 GDP will show a strong economic expansion as the record drawdown of inventories will set the stage for increased production. The S&P 500 rose 1.73 points to 988.48, moving closer to the 1000 resistance on economic recovery optimism. The euro gained on improved risk sentiment and better-than-expected European labor market statistics. The GBP/USD surged above the important 1.66 resistance. The yen rose against the dollar but fell versus most other key currencies. The commodity currencies advanced. The Australian dollar rose to the highest level since September. The Reserve Bank of Australia will likely keep its key interest rate unchanged at 3.00% early next week. The Canadian dollar climbed to the highest level since October.
The dollar index fell sharply on Friday. The dollar index, trading inversely with the stock market and risk appetite, is testing the lows set in June and December. The index peaked in the beginning of March, which coincided with the US stock market's low. The index then traded sharply lower as stocks rallied. During June's stock-market consolidation, the dollar index moved sideways. If the 78-area support is broken, the index will drop significantly.
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