LONDON, Jan 11: The dollar gained slightly in European trade on Friday after tumbling a day earlier and the price of gold raced to a record above $900 an ounce, traders said.

Traders said disappointing trade data from the US would normally be negative for the dollar, meaning the US unit had probably benefited from a technical bounce.

The Commerce Department said the US trade deficit in November swelled 9.3 per cent to $63.1 billion, its highest level in 14 months, owing to record crude oil prices.

The price of gold on crossed $900 an ounce for the first time in New York trading, driven by the prospect of a significantly weaker dollar as the market bet on new US interest rate cuts.

Gold futures hit a record $900.10 on the New York Mercantile Exchange.

The falling dollar makes gold, which is priced with the US unit, cheaper for buyers using stronger currencies.

In London, at the evening fixing the price stood at $891 an ounce, from $884.25 on Thursday, after earlier reaching a record high of $898.03.

Sterling hit a new all-time low against the euro and ten-month trough versus the dollar on expectations of another interest rate cut from the Bank of England at its next meeting in February.

In late European trading on Friday, the euro slipped to $1.4786 from $1.4807 in New York late on Thursday.

The dollar dipped to 109.13 yen from 109.27 yen late on Thursday.

The factor driving the foreign exchange market is the US Federal Reserve, which is expected to cut interest rates at its meeting at the end of the month.

“Whether the Fed cuts 25 or 50 basis points will depend upon the outcome of next week’s torrential deluge of US economic data highlighted by CPI on Wednesday,” said Woolfolk.

The dollar tumbled on Thursday on expectations of further cuts to US interest rates after Federal Reserve chairman Ben Bernanke said the US central bank was ready to trim interest rates again amid lingering economic uncertainty.

Lower interest rates typically weaken a currency as speculators prefer to invest in currencies where interest rates are higher, or are perceived to be heading higher, in a bid to reap higher returns on their investments.

Traders ratcheted up their expectations that the US central bank would unleash a 50 basis point cut to 3.75 per cent at a policy meeting scheduled for January 29-30.

Bernanke’s comments on Thursday came after the European Central Bank decided to keep its main interest rate at 4.00 per cent against a backdrop of rising inflation and slowing economic growth.

In European trading on Friday, the euro changed hands at $1.4786 against $1.4807 late Thursday, at 161.32 yen (161.85), 0.7549 pounds (0.7548) and 1.6305 Swiss francs (1.6330).

The dollar stood at 109.13 yen (109.27) and 1.1028 Swiss francs (1.1028).

The pound was at $1.9587 ($1.9613).—AFP