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Currencies: Dollar sees largest two-week decline against euro since 2012

NEW YORK (MarketWatch)—The U.S. dollar booked its largest two-week decline against the euro since September 2012 on Friday, sliding on expectations that the Federal Reserve will begin raising interest rates later, and more gradually, than market participants had previously anticipated.

The euro EURUSD, +0.04%  traded at $ 1.0886, compared with $ 1.0880 late Thursday. The dollar traded at 119.19 yen, compared with ¥119.19 level seen late Thursday.

The dollar lost about 3.7% against the euro over the last two weeks. That’s the largest percentage decline since the week ending on Sept. 14, 2012, shortly after the European Central Bank introduced its program of outright monetary transactions, which helped restore investors’ confidence in eurozone sovereign debt.

Still, the euro is down more than 10% versus the dollar since Dec. 31.

Federal Reserve Chairwoman Janet Yellen spoke at a conference hosted by the Federal Reserve Bank of San Francisco, but her words had little impact on the dollar. She reiterated the view, established at last week’s Fed policy meeting, that a rate hike would happen some time this year, and that the central bank is in no hurry to raise interest rates.

Read: Fed’s Yellen says rate hikes—but not too many—are coming

Earlier in the session, the Commerce Department released its final revision of fourth-quarter gross domestic product growth. It showed the U.S. economy grew 2.2% in the last three months of 2014, unchanged from the previous estimate. Economists polled by MarketWatch had expected 2.4% growth.

Many analysts had expected a moderation in fourth-quarter GDP growth after the annualized growth rate for the third quarter rose to 5%, the highest reading since the third quarter of 2003.

“Anyone who thought the U.S. economy was going to continue to pump out such outstanding figures was too ambitious,” Jameel Ahmad, chief market analyst at FXTM, said. Growth of “2.2% for a developed economy, this is still a very strong figure. If anything it points to the fact that the U.S. economy is continuing to tick along nicely.”

The U.S. economy saw strong readings on consumer-price inflation and new-home sales earlier in the week, but the durable-goods orders report, released on Wednesday, was seen supporting the notion of delayed rate hikes.

“Core durable goods orders have fallen for 5 months in a row, and hopes of a significant rebound in capital spending and fixed investment continue to fail to materialize,” said Kit Juckes, global strategist at Société Générale. “Add that to the lack of wage or consumer price pressures, and the arguments for an aggressive or protracted rate-hiking cycle remain absent.”

The ICE U.S. Dollar Index DXY, -0.03% which gauges the dollar’s strength against six major currencies, was down EURUSD, +0.04%  slightly at 97.39.

The pound GBPUSD, +0.22%  traded at $ 1.4907, compared with $ 1.4853 Thursday.

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