U.S. Dollar Plunges as U.S. Economy Expands Slower than Expected

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U.S. Dollar Plunges as U.S. Economy Expands Slower than ExpectedThe U.S. dollar plunged after the U.S. economy expanded at a slower pace than expected in the first quarter.

The dollar was trading down at 0.3 percent at $1.3858 against the euro as of 8:50 a.m. in New York. The Bloomberg Dollar Spot Index plunged 0.2 percent, bringing its total monthly decrease to 0.7 percent. The greenback also fell 0.3 percent against the yen on Wednesday.

U.S. gross domestic product expanded 0.1 percent year-on-year in the first three months of the year, down from 2.6 percent in the fourth quarter of 2013. The figure was also less than the median estimate of 1.2 percent expansion in a Bloomberg survey of 83 economists.

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The slow growth was mostly attributed to the harsh winter weather that slowed down business activity. Inventories grew at a smaller pace while exports plunged, reported the Commerce Department on Wednesday.

The Standard & Poor’s 500 Index futures fell 0.1 percent after the data was released. The Stoxx Europe 600 Index plunged 0.2 percent, while the MSCI Emerging Markets Index tumbled 0.5 percent.

Analysts predict that the U.S. Federal Reserve will taper its bond-buying program for the fourth consecutive month.

“The Fed’s possible cut in its bond purchases may add to worries that funds will flow out of emerging markets,” Wei Wei, a Shanghai-based analyst at West China Securities Co., told Bloomberg. “The tussle between Russia and the U.S. will impact the financial markets by curbing investors’ risk appetite.”

A separate report by New Jersey-based ADP Research Institute showed that private employers in the U.S. hired 220,000 more workers in April, up from 209,000 in March. However, this wasn’t enough to stem the dollar’s decline. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com