The dollar rose to a three month high against the yen and a near two month high against the euro in Wednesday trading after the US trade deficit unexpectedly fell.
The dollar rose to ¥119.63 during foreign exchange trading yesterday and to $1.2936 against the euro, its highest levels since October 16th and November 23rd respectively.
The bounce was delivered by positive trade deficit data for November, while the president of the Federal Reserve Bank of Chicago added a fillip with rate speculation.
Bank president Michael Moskow told the press that US inflation remains a concern and that further increases in the Federal Reserve rate are "certainly" needed.
"The US trade deficit may have reached a peak," Matthew Strauss of Canadian bank RBC Capital Markets.
"An improving trade picture means the U.S. is less dependent on foreign capital inflow, which is positive for the dollar."
The trade deficit fell from $58.8 billion dollars in October to $58.2 billion in November. Initial estimates ahead of the release had estimated the trade gap at $60 billion.
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