Dollar topples from two-month high as Wall Street worries persist

New York

THE US dollar followed Wall Street lower on Friday, falling from the two-month high hit earlier in the day after news of stronger-than-expected third-quarter gross domestic product.

US stocks were off their lows late Friday, but remained down for the day, as concerns about a slew of disappointing earning forecasts persisted, showing how tariffs, rising wages and higher borrowing costs as well as jitters over geopolitical events are hurting companies. The dollar index fell as much as 0.57 per cent against a basket of six rivals as Wall Street sold off, last at 96.43. The move ended a losing streak for the euro, which has fallen 1.85 per cent this month on pessimism about Italian budget talks - and fear of contagion across the bloc. Against the euro, the dollar fell as much as 0.71 per cent, last at $1.140.

Safe-haven currencies moved in lock-step with US stocks. In afternoon trade the Japanese yen was up for the day, but as stocks recovered, the yen had retraced almost all the gains it had made on the initial dollar drop. The move in the Swiss franc was similar, weakening in the afternoon after having risen to its highest since Aug 20, on Friday morning.

The US economy slowed less than expected in the third quarter, the Commerce Department reported, as the strongest consumer spending in nearly four years and a surge in inventory investment offset a tariff-related drop in soyabean exports. Net exports took 1.8 per cent off of the GDP figure, said Greg Anderson, global head of FX strategy at BMO Capital Markets.

The exchange of tariffs between the US and China has lifted the value of the dollar, which serves as a safe haven in times of geopolitical turmoil. While a strong currency benefits US assets, it also raises the cost of imports and exports, which can slow growth. REUTERS