* 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 shrank in the fourth quarter, in contrast
to an improving economic outlook in the euro zone.
The euro broke above key resistance at $1.35 and traders
said the rally has further to go after recent positive news on
the German economy and Europe's banks.
"The momentum has been to buy euros," said Ronald Simpson,
managing director of global currency analysis at Action
Economics in Tampa, Florida. "Until something changes and
everybody runs for the exit, that's going to be the trade now."
The euro rose as high as $1.3579, its strongest since
Nov. 18, 2011, according to Reuters data, driven by consistent
buying by model funds and momentum accounts. It was last up 0.6
percent at $1.3566.
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.
Some analysts, however, said despite a soft headline GDP
reading, the details of the report were not as bad. Consumer
spending accelerated and business investment rebounded,
suggesting some fundamental strength that should help to support
the recovery even as Washington tightens its belt.
For euro/dollar, traders noted sell offers in the $1.3575-80
area, while defense of an option barrier at $1.3600 may also
limit near-term upside.
Further upside targets are at $1.3640, the high in
mid-November, 2011, and $1.3833-35, the 61.8 percent retracement
of the move down from May 2011 to July 2012, which also
coincides with the July 2011 low.
Euro zone data showed the region's economic sentiment rose
for the third month in a row, while European Central Bank
policymaker Ewald Nowotny said the recovery was seeping into the
The dollar rose 0.4 percent to 91.06 yen, having
risen to a 2-1/2-year 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.
A separate report Wednesday 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