Investing.com - The dollar advanced to 10-month highs against a basket of major currencies on Wednesday after data on second quarter growth indicated that the economy rebounded strongly after a first quarter contraction.
The Commerce Department reported that gross domestic product expanded at an annual rate of 4.0% in the three months to June, outstripping forecasts of 0.3%. The contraction in the first quarter was revised to 2.1% from a previously reported 2.9%.
Personal consumption grew 2.5%, well above predictions of 1.9%, the report said, adding to the view that the economic recovery is gaining traction.
The robust data offset a report showing that the U.S. private sector added just 218,000 jobs in July, falling short of forecasts for jobs growth of 230,000.
Investors were still awaiting the outcome of the Federal Reserve’s latest policy meeting later in the day, as well as the government nonfarm payrolls report for July on Friday.
The dollar has strengthened since Fed Chair Janet Yellen said earlier this month that interest rates could rise sooner if the recovery in the labor market continued.
The euro fell to fresh eight month lows, with EUR/USD down 0.26% to 1.3372.
The euro remained under heavy selling pressure amid concerns over the divergence in monetary policy between the European Central Bank and its major peers.
Data on Wednesday showed that Spain’s economy at a faster than expected rate in the second quarter, but a separate report showed that consumer prices fell unexpectedly this month, underling concerns over the threat of deflationary pressures in the euro area.
Another report showed that the annual rate of inflation in Germany slowed to 0.8% this month from 1% in June.
The euro zone was to release what would be closely watched data on consumer prices on Thursday.
The dollar rose to almost three-month highs against the yen, with USD/JPY advancing 0.69% to 102.81, while USD/CHF added 0.34% to trade at a six month high of 0.9100.
Sterling fell to fresh one-and-a-half month lows, with GBP/USD down 0.32% to 1.6890.
The Australian, New Zealand and Canadian dollars fell to multi-month lows, with AUD/USD losing 0.74% to trade at 0.9314, NZD/USD sliding 0.44% to 0.8465 and USD/CAD rising 0.48% to 1.0904.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.39% to 81.63, the most since September 2013.