NEW YORK, Oct. 30 (Xinhua) -- The dollar ended the week higher against many major currencies amid disappointing U.S. economic data, which showed that the road to recovery could be bumpy.
The euro bought 1.4730 dollars in late Friday New York trading, about 1.8 percent lower than a week ago. The dollar rose 2.6 percent during the past week to 1.0797 Canadian dollars, and 1.6 percent to 1.0252 Swiss francs.
It fell slightly to the Japanese yen and the British pound.
Risk appetite in currency trading picked up temporarily on Thursday amid a strong U.S. GDP report, but pulled back on Friday after a report showed that consumer spending fell in September.
The dollar index, which measures the performance of the greenback against a basket of currencies, stood at 76.30 on Friday, up from a reading of 75.46 a week ago.
With risk sentiment remaining the main driving force in currency trading, the dollar tends to fall against the euro and other higher-yielding currencies on positive economic news, and to rise when investors worry about economic outlook.
Real gross domestic product (GDP) grew a 3.5-percent annual rate in the third quarter, stronger than most expectations, according to the U.S. Commerce Department. It was the first increase after four quarters of contraction.
The report indicated that the United States had finally emerged from its longest and deepest recession in the post-war period. But analysts warned of persistent economic vulnerabilities.
"This welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered," said Christina Romer, chair of the Council of Economic Advisors.
The strong data overstated the strength of the recovery because of temporary factors including the "cash-for-clunkers" program, the tax incentives for homebuyers and the big swing in the inventories, said analysts of research group Global Insight.
A high unemployment rate, weak consumer spending, and tight credit remain key hurdles to a full recovery. A growth relapse is expected in the next few quarters, though not into negative territory.
The "cash-for-clunkers" program, which provides vouchers to buyers who trade their old vehicles for new ones with better mileage, helped auto sales surge in the third quarter. But new vehicle sales plunged soon after the program expired at the end of August.
This program was likely to have merely shifted the timing of planned vehicle purchases rather than to have jump-started the moribund demand for cars, light trucks and SUVs, said Nomura Economic Research.
Personal consumption expenditures in September fell 0.5 percent after rising 1.4 percent in August, the U.S. Commerce Department reported on Friday. It was the largest single month drop since last December, roughly in line with expectations. After inflation, real consumer spending fell 0.6 percent.
Consumer spending on durable goods plunged 7.2 percent in September, confirming the clunker credit's transitory boost. Spending on nondurable goods and service rose mildly.
The report also showed that personal income was flat in September, with wage and salary income 0.2 percent lower. Without increased government transfer payments, personal income would have fallen.
Personal consumer spending accounts for two-thirds of U.S. economic activities. Consumer spending will probably continue to grow, but at a more subdued pace, said analysts of Global Insight.
The lack of income support, reduced wealth, high debt, and tight credit, are all weighing consumers down, as illustrated in recent lackluster readings on consumer sentiment.
The Conference Board's consumer confidence index tumbled by 5.7 points to 47.7 in October. The sharp decline was driven primarily by consumers' perceptions of deteriorating labor market conditions.
The government tax credit for first-time home buyers have boosted house prices and sales in recent months. Effects of the credit, which expires on Nov. 30, were already fading. As it generally takes 30 to 60 days to secure financing, home buyers need to make purchases months before the expiration date to qualify the tax credit.
Sales of newly constructed homes fell unexpectedly by 3.6 percent month-to-month in September to an annualized rate of 402,000 units, the Commerce Department reported on Wednesday. The estimate for June, July and August new home sales were all revised down.
House demand will take a hit after the tax credit expires, analysts said. If the credit was not extended, home prices will drop another 5 percent from current levels, and to hit bottom in 2010, according to Global Insight.
Senators agreed Wednesday to extend the tax credit for first-time home buyers and to offer a reduced credit to some repeat buyers. Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan gave their support to the extension on Thursday.
The credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide, Geithner and Donovan said in a statement.
The U.S. Federal Reserve is expected to leave key rates unchanged at ultra low levels at its monetary policy meeting due next week. Investors will be watching the central bank's statement for any signals on possible interest hikes.
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