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Dollar strengthens despite US budget crunch

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(Globalpost/GlobalPost)

The dollar pushed higher against other major currencies Friday despite Washington embarking on the severe "sequester" budget cuts that economists say will slow US and global economic growth.

The euro dropped momentarily below the $1.30 barrier for the first time since December amid more signs of prolonged recession in the eurozone, where unemployment pushed up a notch to 11.9 percent.

At 2300 GMT the euro was at $1.3027, down from $1.3062 late Thursday.

The dollar and euro gained on the yen, which is expected to weaken further after Haruhiko Kuroda, an advocate of easier monetary policy, was nominated to head the Bank of Japan.

Kuroda, who has been head of the Asian Development Bank, and his two proposed deputies may reveal more of their thinking in speeches to the Japanese parliament next week.

The dollar pushed to 93.59 yen from 92.58 yen, while the euro rose to 121.92 yen, from 120.95 yen.

The greenback's gains were also helped by some improved economic data, including an advance in the University of Michigan consumer confidence index and gains in a manufacturing index for February.

Such improvement, and the aggressive level of the Federal Reserve's bond-buying stimulus, have led market participants to largely dismiss the $85 billion in government spending reductions over seven months due to begin Friday.

"As the fundamental developments coming out of the US point to a more robust recovery, we're seeing a growing number of central bank officials adopt an upbeat tone for the economy," said David Song of DailyFX.

Song said that despite Fed Chairman Ben Bernanke's defense of quantitative easing in front of Congress this week, some analysts were still anticipating an early tightening of US monetary policy this year.

The dollar also gained on the British pound, which fell to $1.5046 from $1.5168.

And the dollar rose to 0.9432 Swiss francs from 0.9362 francs.

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http://www.globalpost.com/dispatch/news/afp/130301/dollar-strengthens-despite-us-budget-crunch