FOREX-Dollar rebounds after US trade report
NEW YORK, July 13 (Reuters) - The dollar rallied on Wednesday, extending gains after a U.S. trade report showed a narrower deficit than expected, easing concerns about the country's external financing problems.
The U.S. trade gap narrowed to $55.35 billion in May, lower than economists' forecast for a $57 billion shortfall. The trade deficit with China, however, swelled 7.1 percent in May to $15.8 billion.
"The indication was for major U.S. ports showing an improvement in exports rather than imports. We also had lower oil prices for April and May, which helped," said Aziz McMahon, senior foreign exchange strategist, at ABN Amro in New York.
The wide trade deficit was a key factor that pushed the dollar into a 30-percent decline against the euro over three years through the end of 2004, but rising U.S. interest rates have fueled a dollar rally in 2005.
"Together with data later in the day on the federal budget, it seems that the structural picture is turning a little bit more positive for the dollar," McMahon said.
The Federal Budget, due this afternoon, is expected to show a surplus of $23.0 billion in June.
In early trade, the euro fell against the dollar to $1.2130, down 0.9 percent from late Tuesday. The dollar traded 0.9 percent higher against the yen at 111.83 yen and was up more than 1 percent against the Swiss franc at 1.2853 francs.
Sterling, meanwhile, dropped more than 1 percent as well to $1.7601.
Some analysts, however, expressed caution about the report. Brian Taylor, managing director of foreign exchange trading at Manufacturers and Traders Bank in Buffalo, New York said that the "market is definitely forward looking and oil prices have since risen." U.S. oil futures hit a record above $62 last week on weather and supply concerns.
So far this year, the dollar has shaken off concerns about structural weakness in the U.S. economy, such as the current account deficit, and gained some 10 percent versus the euro as investors have sought to benefit from rising U.S. interest rates.
The dollar's rally over the last few months, which brought it to 14-month highs versus the euro, has wobbled in the last few days on investor worries about recent weak jobs data and the market grew cautious ahead of the trade numbers.
But traders said it was unclear whether rising U.S. interest rates would continue to give the dollar support or whether worries about structural imbalances would regain the upper hand.
U.S. June retail sales and inflation data will be closely watched on Thursday. (Additional reporting by John Parry)
Source:http://today.reuters.co.uk
For more latest happenings visit again
