TOKYO (MarketWatch) - The dollar got a lift against the euro Wednesday after data showed Germany's economy shrank more than expected in 2009, building on an earlier rise on a U.S. Federal Reserve official's hawkish rate remarks.
Germany's economy shrank in 2009 for the first time in six years, the Federal Statistical Office reported on Wednesday. Gross domestic product contracted 5% compared to the previous year, posting its biggest decline since the Second World War, according to official, preliminary data. Most economists expected a contraction of 4.8%.
In Asian trading, the greenback was boosted by remarks in a speech by Charles Plosser, president of the Federal Reserve Bank of Philadelphia, who said the U.S. central bank should begin to raise interest rates as the economy improves, and not wait for the unemployment rate to come down, according to.
This increase in rates must occur well before the unemployment rate or other measures of resource slack have diminished to acceptable levels," said Plosser, who will be a voting member of the Federal Open Market Committee in 2011, and participates in the discussions of all FOMC meetings.
Higher interest rates typically boost currencies because they boost the return on assets denominated in those currencies.
The euro bought $1.4488, down from $1.4490, in late North American trading Tuesday.
The dollar index (DXY 76.94, -0.01, -0.01%) , was at 77.021, compared with 77.018 late Tuesday. The index gauges the performance of the greenback against a trade-weighted basket of six major currencies.
The dollar rose to 91.41 yen, up from 90.99 yen late Tuesday.
On Tuesday, the dollar advanced against the Australian dollar and other high-yielding currencies, but was little changed against the euro, after the People's Bank of China said it would require banks to hold more cash in reserve as it attempts to restrain credit growth. See Tuesday's Currencies report.
