Lower trade deficit helps USD

Story link: Lower trade deficit helps USD

The US dollar gained on the euro Tuesday after the US Commerce Department reported that the US trade deficit fell to $40.4 billion in November, its lowest in five years.

The greenback was also helped by the perception that it is a safe investment as some speculated that as the first economy hurt by the recession, the US could be the first to recover, while the euro was hurt by rising chances that the European Central Bank will cut interest rates again this week, this time by as much as half a percentage point.

In late morning trade in New York the dollar traded at $1.3182 to the euro while it took ¥89.655 to buy a dollar and ¥118.1848 to buy a euro.

The pound weakened on a series of negative reports, mostly coming from the housing market.

The Royal Institution of Chartered Surveyors said that the average number of homes sold per surveyor in the fourth quarter dropped to 10.1, the lowest in thirty years, while the Department for Communities and Local Government reported that house prices were down at an annualized rate of 8.6 percent in November.

Additionally, a report on 10 January from the National Institute for Economic and Social Research showed that the British economy contracted by 1.5 percent in the fourth quarter.

The pound traded at 90.6p to the euro by late morning in New York, while it took $1.455 to buy a pound, the yen was at ¥130.4452 to the pound and the Swiss franc had gained to SFr1.6355 to the UK currency.