Currencies

Friday May 9, 04:29 PM
Forex - Dollar firms after better-than-expected U.S. trade data

LONDON (Thomson Financial) - The dollar was firmer after U.S. trade data showed the deficit narrowing by more than expected, boosting the prospects that first quarter GDP figures may be revised up.

The U.S. trade deficit dropped sharply to $58.2 billion in March from $61.7 billion in February, way below forecasts for a much smaller drop to $60.8 billion and helped by a a sharp drop in imports.

'Trade continues to be a huge support for the U.S. economy,' said Nigel Gault at Global Insight, adding that the figures 'point to an upward revision in first quarter real GDP'.

'Export demand is holding up well, despite the setback in March, which was mostly due to a temporary drop in aircraft. Meanwhile, much of the slowdown in U.S. domestic spending is being passed on to the rest of the world through lower imports,' he said.

Analysts noted, however, that recent sharp increases in the price of oil will push the overall deficit higher in the coming months.

The dollar's gains against the euro were therefore limited, with the single currency still benefiting from Thursday's hawkish comments by European Central Bank president Jean-Claude Trichet.

The ECB's decision to leave rates unchanged at 4.00 percent was widely expected, but many markets watchers were anticipating the central bank would acknowledge the risks of an economic slowdown had accelerated.

Trichet, however, continued to emphasise that preventing a prolonged period of high inflation remained the bank's primary concern.

'There was the slightest of chances Trichet would acknowledge the softening of economic data - in the event he offered few crumbs here and in discussing inflation he even removed references to it being temporary,' said Gavin Friend, currency strategist at Commerzbank (Xetra: 803200 - news) .

London 1509 GMT London 1305 GMT

U.S. dollar

yen 103.12 up from 102.77

Swiss franc 1.0438 up from 1.0401

Euro

U.S. dollar 1.5438 down from 1.5455

yen 159.21 up from 158.88

Swiss franc 1.6114 up from 1.6082

pound 0.7925 down from 0.7936

Pound

U.S. dollar 1.9480 up from 1.9474

yen 200.80 up from 200.15