The US dollar slipped against most major currencies apart from the yen as a recovery in share prices around the world indicated increased risk tolerance despite a worse-than-expected US economic growth report. The US economy contracted at a steeper-than-expected pace of 6.1 percent in the first quarter, weighed down by sharp declines in exports and business inventories, showing the economy was still deep in recession. With rates already near zero, the focus will now turn to the Fed as markets look for any extension of quantitative easing and will scrutinize the central bank's economic outlook amid signs that a downturn is easing.

The euro strengthened against the US dollar on improving regional business sentiment. A one percent rise in European shares helped to prompt investors to buy the single currency, which fell earlier in the week after concerns about swine flu triggered risk-averse selling. Also helping the euro was a European Commission survey showing that economic sentiment in the region improved to 67.2 points in April from 64.7 in March, rising more than expectations for a climb to 65.2 points.

Sterling strengthened against the US dollar and other major currencies in line with a recovery in currencies perceived to be higher risk, though investors were cautious ahead the Federal Reserve policy decision. Sterling rebounded against the greenback and the yen as the heightened risk aversion seen earlier in the week abated, pushing UK equities up 0.2 percent. The pound also continued to gain on the back of Tuesday's surprisingly upbeat UK retail sales survey from the Confederation of British Industry, which supported hopes that the UK economy may be over the worst of the recession.

The Japanese yen weakened broadly on improving risk demand, which along with the US dollar had risen earlier in the week, when uncertainty about the impact of a spread in swine flu had sparked safe-haven buying in the two currencies, which are considered low-risk.

The Canadian dollar climbed to its highest level in nearly two weeks supported by a rise in the price of oil, a key Canadian export, and some signs of improved economic sentiment. The surge in the Canadian dollar followed similar moves by other commodity-linked currencies like the Australian and New Zealand dollars and reclaimed the ground lost earlier this week when the outbreak of the swine flu virus raised concerns about the possible economic impact.

The Australian dollar rallied on the back of improving risk appetite as a sprinkling of better economic news at home and abroad helped shove aside worries over swine flu, at least for the day. The New Zealand dollar rose sharply after a surprisingly strong business confidence survey raised hopes the recession-hit economy might be turning a corner. However, the survey did little to alter expectations the central bank will cut interest rates at its next policy meeting on Thursday, but added fresh uncertainty to the debate over whether the bank would go for a bold 50 basis point cut or a more modest 25 basis point cut move.

Indicative rates:

EUR/USD 1.3293

USD/JPY 96.63

GBP/USD 1.4794

USD/CAD 1.1981

USD/MXN 13.6434

USD/CHF 1.1304

AUD/USD 0.7227

NZD/USD 0.5726

USD/DKK 5.6100

USD/SEK 8.0687

USD/NOK 6.5650

USD/TWD 33.640

USD/CNY 6.8243

10-Year Treasury Note Yield : 2.992%

Dow Jones Industrial Average : 8,163.26 + 146.79