US dollar stronger despite near-record trade deficit; euro weaker on day

Story link: US dollar stronger despite near-record trade deficit; euro weaker on day

The US dollar was stronger on Thursday despite the report of a near-record trade deficit of $59 billion in August, the key being that as high as the figure was, it was lower than had been expected by analysts. The trade deficit was helped higher by high prices for oil imports. Bond yields that were up were also a factor in the dollar’s movement on the day.

Perhaps most notable was the rise of the dollar to a new two-year high versus yen as the Japanese currency weakened on a drop in that nation’s trade surplus that was larger than expected in August as well as increased capital exports out of Japan.

The US dollar was up 0.7 percent on the day to ¥115.08 in relation to the yen. The greenback was up 0.8 percent to R6.6176 versus the South African rand, it gained 1.1 percent to TL1.3712 versus the Turkish lira, while it was up to $1.7478 against sterling.

The euro was weaker on the day even though there was positive economic news out of Europe. Italy issued a report that industrial production was up more than had been expected, while inflation in France was reported up by 2.4 percent, above the analysts’ estimates of a 2.2 percent rise.

The euro fell 0.4 percent to £0.6830 in relation to sterling and dropped 0.7 percent versus the US dollar to $1.1939.

Elsewhere, the Swedish krona lost 0.5 percent to SKr9.4103 in relation to the euro on weaker than forecast headline inflation in September. However the Swedish National Institute of Economic Research increased its predictions for the nation’s economic growth in both 2005 and 2006 and said that the central bank should begin to raise interest rates in April 2006.