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US dollar stronger versus euro


by Elaine Frei
April 12, 2006

The US dollar was stronger in relation to other currencies on Wednesday on new data showing that the US trade deficit has gotten smaller. After consideration of the new figures, however, investors sent the greenback slightly lower again for a mixed day overall.

The trade deficit shrunk by $2.9 billion in February to $65.7 billion, while the bilateral deficit with China dropped by $4.1 billion, from $17.9 billion to $13.8 billion. This unexpectedly large decline in the deficit with China was at least partly due to the timing of the Chinese New Year. The bilateral deficits with the European Union and Canada were also lower. The US exported goods and services worth $113 billion in February, $1.3 billion less than in January. However, imports declined even faster and were down by $4.2 billion to $178.7 billion.

At one point in the day, the dollar had risen to $1.2067 versus the euro, but when analysts concluded that the lower deficit was likely not the beginning of a trend, the dollar weakened. While it eventually settled at $1.2109 in relation to the euro, 0.2 percent higher, the greenback lost 0.1 percent against the Japanese yen, to ¥118.46.

Elsewhere, the announcement by Iran that it has now produced enriched uranium did not help the dollar but did help the Swiss franc, long seen as a safe investment in times of upheaval, against some currencies. The Swissie gained 0.2 percent versus the euro to SFr1.5734 and was slightly up on the dollar to SFr1.2991. However the Swiss franc declined 0.2 percent in relation to sterling, to SFr2.2743.

Sterling added 0.2 percent versus the US dollar, to $1.7507 and it gained 0.4 percent on the euro to £0.6916. The British currency also reached a nine-week high versus the yen at ¥207.53.

The Icelandic krona dropped to a four and a third year low versus the euro and a two and a half year low against the US dollar as the consumer price index added 1.1 percent in April, sending Icelandic inflation to 5.5 percent. The krona was at IKr92.51 in relation to the euro, a drop of 2.4 percent. It fell 2.7 percent to IKr76.37 versus the greenback.



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