The Dollar Index slid to the lowest level since 2008, Treasuries rose and gold rallied to a record after economic growth slowed. The Standard & Poor’s 500 Index climbed an almost three-year high as rising earnings and takeovers overshadowed the report on gross domestic product.
The Dollar Index tumbled 0.6 percent at 4:10 p.m. New York time after slumping to 72.871, an almost three-year low. It declined for an eighth straight day, its longest slump since 2009. Ten-year Treasury yields lost five basis points to 3.31 percent, gold jumped as much as 1.4 percent to $1,538.80 an ounce and silver rose for a second day. The S&P 500 climbed 0.4 percent to 1,360.48 while the Russell 2000 Index of smaller U.S. stocks rallied to a record for a second straight day.
The dollar and Treasuries reacted to government data showing gross domestic product expanded at a 1.8 percent annual rate in the first quarter. That trailed the 2 percent median forecast in a Bloomberg survey of economists, reinforcing the Federal Reserve’s assessment that the “moderate” economic recovery still requires record-low interest rates. A separate report showed jobless claims unexpectedly increased.
“We’re all reacting to the numbers and looking for sustainable growth,” said Firas Askari, head currency trader in Toronto at Bank of Montreal. “The dollar weakness is a trend that’s hard to break,” he said. “The momentum we did seem to be having in the U.S. economy seems to be hitting some headwinds. Best case scenario: the U.S. economy is lukewarm.”
Dollar Slumps
The dollar weakened against 11 of 16 major peers, losing more than 0.7 percent versus the yen and South Korean won. It pared losses after slumping as much as 0.6 percent against the euro to breach $1.48 for the first time since December 2009.Treasuries pared gains after a U.S. auction of $29 billion in seven-year notes drew weaker-than-average demand. The securities yielded 2.712 percent compared with a forecast of 2.698 percent in a Bloomberg News survey of nine of the Fed’s primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, was 2.63, the lowest since November, versus a 2.89 average at the past 10 sales. Bonds headed for the biggest monthly gain since August after Fed Chairman Ben S. Bernanke said yesterday interest rates will likely remain low.
