Government data showed the U.S. economy shrank at a 6.2% annual rate in the fourth quarter, a larger-than-expected contraction and worse than the prior reading.
Adding to concerns about the banking system, the U.S. government committed to holding up to 36% of Citigroup's common shares to bolster the fallen financial giant's capital base, and gave most of the bank's board their marching orders.
Earlier in the day, the dollar made gains against euro and the pound, as news of the Citigroup (C, Fortune 500) deal sent bank stocks and the broader equity market lower. That prompted risk-averse investors to buy the dollar, according to Adam Fazio, senior currency strategist at CIBC World Markets in New York.
In afternoon New York trade, the euro rose to 1.2681 from $1.2643andsterling gained to 1.4307 from $1.4175.
Yen strikes backThe yen was the other bright spot for currency investors with the dollar falling to 97.71 from ¥97.84 earlier Friday. The yen hit a three month high against the dollar the previous day at ¥98.70, according to Reuters data.
Traders cited month-end flows for the yen rise even as Japanese industrial output data continued to paint a bleak picture of the economy.
On a monthly basis the dollar is on course for a rise of more than 8.4% on the yen, its biggest monthly gain in percentage terms since 1995.
Japanese industrial production plunged 10.0% in January from the previous month, posting its biggest drop on record and underscoring the somber outlook that has helped drive the yen lower in the past couple of weeks.
Analysts said the data did little to change views that the yen would resume its slide once profit-taking and month-end selling by Japanese exporters, to benefit from the favorable exchange rates, had worked its way through.
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