* Euro rises above resistance at $1.35, highest since Nov.
* U.S. economy unexpectedly contracts in 4th quarter; Fed
* Yen slide resumes, more losses in store
By Wanfeng Zhou
NEW YORK, Jan 30 The dollar fell to a 14-month
low against the euro on Wednesday after data showed the U.S.
economy unexpectedly contracted in the fourth quarter, in
contrast to an improving economic outlook in the euro zone.
U.S. gross domestic product fell at a 0.1 percent annual
rate, the Commerce Department said, suffering its first decline
since the 2007-09 recession and denting hopes the Federal
Reserve may end its bond-buying stimulus measure sooner rather
"It's an awful number. This dashes hopes among investors
that the Federal Reserve will move away from an ultra-easy
monetary policy," said Joe Manimbo, senior market analyst at
Western Union Business Solutions in Washington.
"This is a source of weakness for the dollar because it
takes away the narrative that the U.S. economy is performing
better than the rest of the world."
The Fed concludes its two-day meeting later in the day.
While the central bank is expected to keep monetary policy on a
steady path, intensive debates continue behind the scenes over
when the controversial bond-buying program should be curtailed.
The euro rose as high as $1.3558 after the GDP data,
near a session peak of $1.3563 hit earlier in the global
session, the strongest level since November, 2011, according to
Reuters data. It was last up 0.4 percent at $1.3549.
The euro picked up momentum after it broke above an option
barrier and psychologically important level at $1.3500, with
traders citing sustained demand from model and macro funds.
Analysts said the recent trend of euro strength could be
maintained, after data showed euro zone economic sentiment
rising for the third month in a row and comments from European
Central Bank policymaker Ewald Nowotny that the recovery was
seeping into the real economy.
A separate report showed U.S. private employers added
192,000 jobs in January, more than economists were expecting, in
a sign of growth in the labor market. The data comes two days
ahead of the all-important government nonfarm payrolls report.
The dollar briefly trimmed gains versus the yen after the
GDP data before recovering. It was last at 91.15 yen, up
0.5 percent on the day, having risen to a 2-1/2 high at 91.40
yen on Reuters data. Traders reported an option barrier at 91.50
yen which could cap gains in the near term.
Selling the yen has been mostly a one-way bet since
mid-November, based on expectations that Japanese Prime Minister
Shinzo Abe would push the BOJ into more aggressive monetary
easing to beat deflation.
"We have a forecast of 95 yen for this quarter but even that
could be exceeded given the pace of the current moves," said Ian
Stannard, head of European FX strategy at Morgan Stanley.