US trade data drives dollar
Improving trade figures saw the dollar make the major moves overnight among the leading currencies, although many investors are still holding out for further data ahead of any forecasts.
The US dollar struggled overnight against the euro, easing out from $1.2250 to the euro to $1.2291.
The unexpected move stemmed from better-than-expected trade data as figures from the government indicated exports had grown in July as the trade deficit narrowed.
Falling by 2.6 per cent to $57.9 billion, the deficit cut comfortably surpassed expectations on Wall Street, with the narrowing trade gap meaning less conversion of the US dollar into overseas currencies to pay for imports.
RBC Capital Markets strategist T.J.Marta told Bloomberg that the trajectory of the deficit "could give the US dollar some legs", but many observers say that the market remains in limbo until the full effects of Hurricane Katrina are felt in the markets.
A flurry of US economic data issued this week has so far proved positive, but the figures largely pre-date the storm that devastated the Gulf Coast, with potential for a rate freeze by the Federal Bank still existing.