The dollar dropped Friday as a report on consumer spending reinforced concerns about U.S. economic growth, according to AP. The Commerce Department said that consumer spending rose 0.4 percent in April, but mostly because of rising prices for food and gasoline. Incomes rose 0.4 percent, but were flat for the second month in a row when adjusted for taxes and inflation. Consumer spending accounts for 70 percent of U.S. economic activity. Muted shopping will likely weigh on economic growth and encourage the Federal Reserve to keep interest rates near zero to support the economy. But central banks overseas are raising rates. Currencies in countries with higher interest rates tend to be more attractive to investors. Another report showed that pending home sales fell sharply in April, hitting their lowest point since fall and renewing fears that a recovery in the housing market is far off. In afternoon trading in New York, the euro rose to $1.4280 from $1.4140, even as worries about a possible debt default in Greece persisted. Political parties in Greece could not agree on new austerity measures, despite strong pressure from the European Union. EU leaders want Greece to cut government spending in order to get an additional round of aid beyond last year's emergency loan package. In other trading, the British pound gained to $1.6472 from $1.6389, while the dollar fell to 80.82 Japanese yen from 81.30 yen. The dollar hit a record low against the Swiss currency at 0.8509 Swiss franc, later trading up slightly to 0.8534 Swiss franc from 0.8661. The U.S. currency fell to 97.64 Canadian cents from 97.88 Canadian cents.
