UPDATE 6-Dollar sluggishness persists after strong U.S. GDP data

* Strong GDP does little to boost dollar
* Fed's Powell quashes tapering talk, Biden touts spending
* CAD lifted to three-year high
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

(New throughout)
By Kate Duguid
NEW YORK, April 29 (Reuters) - A report of strong U.S.
economic growth in the first quarter did little to bolster the
dollar on Thursday, which stayed just off nine-week lows as a
doggedly dovish outlook from the Federal Reserve and bold
spending plans from the White House furthered expectations that
inflation will rise.
Gross domestic product increased at a 6.4% annualized rate
in the first quarter, the Commerce Department said, the biggest
first-quarter increase in growth since 1984. First quarter
growth was powered by consumer spending, which increased at a
10.7% rate versus a 2.3% pace in the fourth quarter.
"The U.S. dollar is struggling to advance this morning after
weakening notably Wednesday in the aftermath of another massive
stimulus bill announced by U.S. President Joe Biden and a
Federal Reserve indicating it will act like a dove
indefinitely," wrote Matthew Eidinger, a market strategist at
Cambridge Global Payments.
Strong economic growth will typically increase the value of
the dollar: stronger growth drives more spending, which in turn
drives prices higher. As prices rise, the Fed has historically
intervened by raising interest rates to prevent inflation. But
the Fed is currently committed to keeping rates low, suggesting
rising consumer prices could hamper the dollar.
The dollar can also be hurt by the government or central
bank's injection of more dollars into the system. On Wednesday,
President Joe Biden's push for another $1.8 trillion in spending
risked expanding the U.S. budget and trade deficits, a perennial
Achilles heel for the dollar. The dollar was also hurt by Fed Chair Jerome Powell comments
on Wednesday which quashed speculation about an early tapering
of asset buying, saying employment was still far short of
target. "The president is proposing more than $4 trillion in new
spending and tax credits, equivalent to around of 18% of annual
GDP. Put that way, the $4 trillion number is fodder for
overheating fears when the economy is already surging with the
help of around $5.5 trillion in COVID-related fiscal stimulus,"
wrote Jim O'Sullivan, chief U.S. macro strategist at TD
Securities.
Against a basket of currencies, the dollar index rose in the
New York session, last up 0.22% on the day to 90.718. Earlier in
the session, the index hit its lowest level since Feb. 26. The
earlier dip in the dollar also drove the euro EUR=EBS to a
nine-week high, though the single currency has since stabilized
to around $1.211.
The Fed's dovishness was in marked contrast to the Bank of
Canada which has already begun to taper its asset buying,
sending the dollar sliding to a three-year trough against the
loonie of C$1.227 CAD= .

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