Euro down against dollar on US economy report

[October 31, 2008]  FRANKFURT, Germany (AP) -- The euro dropped against the dollar on Friday after a report showed the U.S. economy contracting by a smaller margin than analysts had expected.

The 15-nation bought $1.2680 in European morning trade, falling from its level of $1.2967 in New York Thursday following gains in recent days. The British pound declined to $1.6172 from $1.6444.

U.S. stocks traded higher on Thursday after the Commerce Department said gross domestic product fell at a yearly rate of 0.3 percent in the third quarter. The economy had grown by 2.8 percent in the previous quarter, but the decline was smaller than had been predicted.

As well as the better-than-expected U.S. economic picture, markets are looking ahead to meetings next week at which the European Central Bank and the Bank of England are both expected to cut interest rates.

Lower interest rates mean lower returns on some investments, prompting investors to move out of those currencies.

The dollar was down to 97.17 Japanese yen on Friday from 98.48 yen after Japan's central bank made a smaller-than-expected rate cut, trimming its benchmark rate to 0.3 percent from 0.5 percent.

[Associated Press]

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