The dollar extended losses on Friday after the U.S. government said the economy advanced at a slower-than-expected 3.7 percent clip in the third quarter. "The data was disappointing, and given the bias in the market it is not helpful for the dollar. It does keep the bias toward a weaker dollar intact," said Bob Lynch, senior currency strategist at BNP Paribas in New York. Real gross domestic product rose 3.7 percent in the July through September quarter, a faster pace than the 3.3 percent registered in the prior three-month period but well short of the 4.2 percent clip forecast by economists. The euro was trading at $1.2751 , up 0.05 percent on the day and up from $1.2725 shortly ahead of the data. The dollar was down 0.20 percent against the yen at 106.04 yen versus 106.25 ahead of the data. "It's a decent number but everything is pointing to a weaker dollar. Treasuries are rising and yields are falling. The dollar is weak and will remain weak," said John McCarthy, director of foreign exchange trading at ING Capital Markets in New York. "The market is very concerned about an undecided (US presidential) election next week, and that's the gravest concern (weighing on the dollar right now)," he added.
Americans go to the polls next Tuesday. The latest /Zogby opinion poll has President George W. Bush and challenger Senator John Kerry in a dead heat. Traders also said they were awaiting more forward-looking U.S. data due out later on Friday morning, especially the Chicago Purchasing Management Index for October, due out at 10:00 a.m. (1400 GMT) and the University of Michigan final October sentiment index, due out shortly before that. Economists polled by expect the Chicago PMI, a measure of business activity in the Midwest to fall to 59.0 from 61.9 the prior month. The sentiment index is seen sliding to 88 from 94.2.
MEANWHILE, OVERSEAS
The euro got a brief push higher after euro zone data showed inflation in the 12-nation region surged to 2.5 percent in October, further above the European Central Bank's goal, due to soaring oil prices. In Japan, authorities appeared reluctant to step into the market despite the yen's decline, with many analysts arguing the coming U.S. election was keeping them at bay. Bank of Japan governor Toshihiko Fukui said recent currency moves were not a risk to the economy. "His comments suggest we are not seeing the line in the sand yet. Japan is reluctant to intervene before the U.S. election," said Steven Pearson, chief currency strategist at HBOS in London. The dollar slipped to fresh six-month lows of 105.92 yen following Fukui's comments. Lynch at BNP Paribas warned against getting taken in by Japanese policymakers' rhetoric. "When they were intervening in the billions of dollars last year, the official rhetoric didn't match it. If the currency moves too fast, whether Japan announces it or not, they will intervene," he said. Japan's ministry of finance said it did not intervene in the foreign exchange market in the four weeks ended Oct. 27 despite the yen's rise.///