July 12, 2006	Wednesday	Jumadi-ul-Sani 15, 1427

LONDON, July 11: The dollar drifted lower against other major currencies on Tuesday as the markets waited uneasily for US trade figures for May.The euro stood at $1.2755 in late European trading from $1.2733 late in New York on Monday.

The dollar slipped to 114.16 yen from 114.23 yen late on Monday.

Analysts expect the data to show that the US trade deficit rose in May to around $65 billion from 63.4 billion in April and reignite concern about how to fund the shortfall, especially as global liquidity decreases.

“There is a risk for the dollar from the trade numbers,” said Hans Redeker, global head of forex strategy at BNP Paribas.

The US currency has been on the defensive for much of this year, partly owing to structural considerations surrounding the US current account deficit, which accounts for about 6 per cent of the country's GDP.

Interest rate factors have also weighed on the dollar, and the currency market awaits further guidance about the outlook for US borrowing costs as Friday's US jobs report did little to alter the picture.

Expectations of a US Federal Reserve rate hike in August diminished substantially recently as a result of comments published by Fed policy-makers when they announced their decision to lift the key Fed funds rate a quarter point for the 17th consecutive occasion to 5.25 per cent.

Mitul Kotecha, head of global foreign exchange strategy at Calyon, reckoned that the dollar “remains vulnerable” to a further paring back of expectations that US interest rate were set to rise further.

“Upcoming data releases will determine whether the market re-assesses US rate expectations and if, as we expect, the data continue to provide evidence of moderating growth it will not bode well for the dollar from a cyclical perspective,” he said.

Elsewhere, the yen garnered some support ahead of Friday's expected rate hike from the Bank of Japan, despite some weak Japanese consumer confidence news early on Tuesday.

If the BoJ did raise interest rates, it would be the first time in six years.

The pound drifted lower meanwhile following disappointing British trade news.

The Office for National Statistics said that the gap in British trade in goods with the rest of the world widened to £6.8bn in May from 5.6bn in April, the second widest monthly shortfall ever.

Analysts had predicted a much narrower deficit of £5.7 billion.

The euro was changing hands at $1.2755 against 1.2733 on Monday, 145.60 yen (145.47), 0.6924 pounds (0.6916) and 1.5670 Swiss francs (1.5667).

The dollar stood at 114.16 yen (114.23) and 1.2283 Swiss francs (1.2301).

The pound was being traded at $1.8429 (1.8408).—AFP