* Fed's Rosengren says stimulus should only be removed
* Swiss franc falls sharply as reserves data weighs
* Euro resists more falls, helped by inflation data
* Focus this week on Fed minutes, U.S. jobs data
By Curtis Skinner
NEW YORK, Jan 7 The dollar rose to a one-month
high on Tuesday, buoyed by U.S. trade deficit data that is
expected to boost estimates for fourth-quarter growth in the
world's largest economy.
The U.S. trade deficit in November narrowed to its lowest
level in four years, as exports hit a record high and weaker oil
prices restrained import growth, the latest evidence of
strengthening economic fundamentals.
The measure is included in the calculation of gross domestic
product, so the narrowing of the deficit could prompt economists
to bump up their U.S. growth estimates for the last quarter of
"Today's trade figures helped investors look past (Monday's)
disappointing services data and bolsters hopes for a faster
recovery this year," said Joe Manimbo, senior market analyst at
Western Union Business Solutions in Washington.
However, Boston Federal Reserve Bank President Eric
Rosengren, one of the Fed's more dovish policymakers, on Tuesday
said the economy remains vulnerable the longer inflation remains
too low and he again warned that policy stimulus should be
removed "only gradually."
In afternoon trading, the dollar was 0.28 percent higher at
104.53 yen, but remained below a five-year peak of 105.44 yen
set last week. The dollar touched as low as 104.18 yen on
Monday, its lowest since Dec. 23.
The dollar index, which tracks the greenback against
a basket of six major currencies, was last up 0.23 percent at
80.840. It hit a high of 80.946, its strongest level since Dec.
The Canadian dollar, meanwhile, fell broadly on Tuesday
after a round of soft economic data. Activity by Canadian
purchasing managers nosedived unexpectedly in December, while
the country posted a big trade deficit a month earlier.
The Canadian currency's losses pushed the greenback
to its highest level since May 2010. The U.S. dollar was last up
1 percent at C$1.0764.
"From a fundamental perspective, this morning's data release
of a significantly worse-than-expected November trade deficit
has weighed further on the Canadian dollar and is likely to
impart a negative tone to investor sentiment" said Samarjit
Shankar, director of market strategy, at BNY Mellon in Boston.
"Moreover, it is clear that asset markets activity of
real-money investors in recent weeks has contributed to loonie
weakness," he added.
The euro rose 0.45 percent to 1.2374 francs, its
highest since October and above the 1.20-per-euro cap which the
SNB has held in place for more than two years. Against the
dollar, the franc also lost ground with the greenback up
0.52 percent to $0.9085 francs.
Data on Tuesday showed Swiss National Bank foreign currency
reserves fell by almost 700 million francs in December,
suggesting pressure on its cap on the franc - which previously
forced it to buy billions of euros - had eased.
"We expect more Swiss franc downside from here given that
the Swiss franc remains excessively overvalued," said Valentin
Marinov, G10 strategist at CitiFX, a division of Citigroup in
Looking ahead, currency trading will likely be swayed by
Friday's U.S. jobs report, which may give clues as to how
quickly the Fed will taper its bond buying. In addition, market
participants will focus on minutes from the Fed's last monetary
policy meeting, scheduled for release on Wednesday.
Meanwhile, the euro was helped by a euro zone inflation
number which was not expected to be low enough to force the
European Central Bank into more action immediately to loosen
monetary policy. The ECB meets on Thursday.
German retail sales and unemployment data were also better
than expected, while Ireland's successful bond issue offered
more optimism on countries in the bloc under sovereign bailout
The euro rose as high as $1.3656, but last traded
down 0.08 percent at $1.3615, remaining above Monday's one-month
low of $1.3570, according to Reuters data.