NEW YORK, June 11: The dollar surged to a fresh nine-month high against the euro on Friday as its recent rally gained extra momentum from a narrower-than-expected US trade deficit. The trade gap widened to $56.96 billion in April — the fourth widest on record — but was narrower than the $58.0 billion anticipated by economists. March’s shortfall was also revised downward to $53.56 billion from $55 billion.
The numbers suggest slightly less foreign capital is needed to fund the US trade deficit, easing the financing pressures that have weighed on the dollar in recent years. They also suggest economic growth forecasts might be raised slightly.
On the margins, it’s working in favor of stronger growth in the US, said Sophia Drossos, currency strategist at Morgan Stanley in New York, referring to the Commerce Department’s latest trade report.
Late Friday, the euro was languishing at $1.2118, down almost 1 per cent compared with late Thursday. The beleaguered currency, which was trading above $1.29 only a month ago, slumped as low as $1.2108 on Friday, its weakest level since Sept. 8, 2004.
The dollar also hit a fresh eight-month high of 1.2701 Swiss francs. Late Friday, the dollar was up more than 1 Per cent on the day at 1.2686 Swiss francs.
Against the yen, the dollar overcame investors protecting an options-related position at 108 yen and good selling from Japanese exporters to gain over 1 per cent to 108.61 yen. Sterling dipped 0.5 per cent to $1.8120. The euro slumped to a 10-month low of 66.77 pence.
The Federal Reserve’s programme of raising interest rates and relatively solid US economic growth compared to Europe and Japan are forcing dealers to unwind the massive bets against the dollar built up over recent years.—Reuters
