Dollar Rebounds From Record Low Versus Euro as Growth Quickens

Quoted from http://www.bloomberg.com/apps/news?pid=20601083&sid=azEST11DN_Ng&refer=currency:

Bloomberg.com: Currencies

Dollar Rebounds From Record Low Versus Euro as Growth Quickens

By Min Zeng

Oct. 31 (Bloomberg) -- The dollar rose from a record low against the euro after reports showed the U.S. economy unexpectedly accelerated in the third quarter and job growth quickened this month.

The U.S. currency gained the most in four weeks versus the yen as the data boosted speculation the Federal Reserve will refrain from cutting borrowing costs later today amid the biggest housing slump in 16 years. The Fed will announce the rate decision at about 2:15 p.m. in Washington.

``The market has expected a doom-and-gloom scenario for the U.S. economy,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. ``There is a disconnect between what the data says and what the market expects. You are seeing a fair amount of bounce back in the dollar.''

The U.S. currency traded at $1.4435 per euro at 9 a.m. in New York from $1.4432 yesterday. The dollar reached $1.4467 per euro today, the weakest since the European currency's debut in January 1999. The dollar rose 0.6 percent to 115.36 yen.

U.S. gross domestic product, the broadest measure of the economy, grew at a 3.9 percent annual pace in the third quarter from a 3.8 percent clip a quarter earlier. The median forecast in a Bloomberg survey was for a 3.1 percent growth rate.

Job Growth Quickens

The dollar started to pare its decline earlier as a private report showed job growth is accelerating. Companies in the U.S. created 106,000 jobs in October, ADP Employer Services said, compared with a median forecast of 58,000 among economists polled by Bloomberg News.

Interest-rate futures traded on the Chicago Board of Trade show a 90 percent chance the Fed will lower its target rate for overnight loans between banks to 4.5 percent today, down from 94 percent odds yesterday. The odds of the Fed holding rates steady rose to 10 percent from 6 percent yesterday. The European Central Bank's key rate is 4 percent, while the Bank of Japan's is 0.5 percent.

The Fed cut its target rate for overnight bank loans by a half-point on Sept. 18 to 4.75 percent, the first reduction since 2003, after losses from subprime mortgage investments roiled credit markets.

To contact the reporters on this story: Min Zeng in New York at mzeng2@bloomberg.net .