Dollar slides on U.S. GDP, Japan bonds fall on BOJ move

Fri Jul 29, 2016 4:25pm EDT
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By Herbert Lash

NEW YORK (Reuters) - Weak U.S. economic growth data knocked down the dollar and yields on U.S. government debt Friday, while Japanese government bond yields rose the most in eight years after investors reacted coolly to the Bank of Japan's latest effort to boost the economy.

The U.S. economy grew far less than expected in the second quarter as inventory investment fell for the first time in nearly five years. But a surge in consumer spending suggested underlying strength and provided a silver lining for investors.

The BOJ doubled its purchases of exchange-traded funds, yielding to pressure from the government and financial markets for bolder action. The move nevertheless disappointed investors who sought more audacious measures.

The yen jumped 3.05 percent against the dollar, whose decline put the trade-weighted dollar exchange rate on course for its biggest weekly fall in two months. The dollar index .DXY fell 1.22 percent to 95.569.

Japan's 10-year bond yield JP10YT=RR soared 10 basis points to -0.17 percent, on course for its biggest one-day rise since April 2008.

World equity markets were mostly higher, with the U.S. benchmark S&P 500 index hitting a record intraday high for the seventh time in July.

A surge in Alphabet (GOOGL.O: Quote) and (AMZN.O: Quote) lifted the Nasdaq following strong results after the bell on Thursday and helped the benchmark S&P 500 to rebound. But disappointing results from oil super-heavyweights Exxon Mobil (XOM.N: Quote) and Chevron (CVX.N: Quote) weighed on the Dow.

Alphabet shares closed up 3.33 percent and Amazon rose 0.88 percent, while Exxon fell 1.39 percent. Chevron rebounded 0.68 percent.   Continued...

An employee of a bank counts US dollar notes at a branch in Hanoi, Vietnam May 16, 2016. REUTERS/Kham