USD stronger as trade deficit lower than expectations

The US dollar was stronger on Tuesday on US trade deficit data that was not as bad as had been expected.

It had been predicted to be just under $60 billion in July, but ended up being $57.9 billion on the month. Non-oil imports were down, which helped keep the deficit limited.

Even before the trade deficit numbers were announced, however, the dollar was helped by comments by the president of the Dallas Federal reserve that the economic risks posed by Hurricane Katrina will be temporary.

These remarks added to the evidence that the Federal Reserve will likely raise US interest rates again on September 20. The dollar was up by 0.2 percent to $1.2263 in relation to the euro, gained 0.4 percent to SFr1.2624 against the Swiss franc, advanced a fraction to $1.8216 versus sterling, and added 0.9 percent to ¥110.81 in relation to the yen.

The euro also gained versus the yen, despite continuing weakness amid uncertainty over the outcome of Germany’s parliamentary elections, which are scheduled for Sunday.

The euro was up 0.7 percent to ¥135.9 versus the yen, but fell 0.2 percent to £0.6731 in relation to sterling.

The yen’s losses to the dollar and the euro reflected profit-taking after Monday’s gains in the wake of the Liberal Democratic party’s huge win in last Sunday’s Japanese parliamentary elections.

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