U.S. Dollar trims losses despite slowing economic growth

The dollar trimmed early losses against other major currencies, despite a government report showing America's economy shrank at a worse-than-forecast 1 percent annual rate during the first quarter. Though the US Commerce Department reported the first quarterly contraction in the US economy in three years, foreign exchange traders focused on signs US economic activity has shrugged off the chilling effects of North America's harsh winter.

"Once you get beyond the headline number, and look under the hood, things don't really look so bad," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "Inventories were to blame for a lot of it and that bodes well for the future." The dollar, which had given back many of its gains on Wednesday against the euro and the British pound, reclaimed some of the day's losses after the GDP report.

The euro, which touched a three-month low under $1.36 this week as expectations solidified for a multi-pronged attack on monetary policy by the European Central Bank next week, stood at $1.3607 in New York trading for a gain against the dollar of 0.13 percent. Just before the GDP report, the euro was up 0.2 percent. The US dollar index, composed of six currency pairs, was off 0.08 percent in late morning after being down 0.17 percent ahead of the GDP report, which was issued simultaneously with Labor Department data showing fewer claims for unemployment benefits.

"The forward-looking view of the world's biggest economy looks much rosier, particularly after solid US data this week on durable goods and consumer confidence," said senior analyst Joe Manimbo at Western Union Business Solutions in Washington. "Better data of late suggest the US economy has since rediscovered the gas pedal with expectations of near or above 3 percent growth for the second quarter."