The dollar was mostly lower on Tuesday, weighed down by a report showing the US current account deficit ballooned to a new record in the second quarter.
The currency remained within a three-month range against the euro as data on the US trade deficit and retail sales did little to change views on the economy or on the Federal Reserve's course of raising official interest rates at a "measured" pace.
The current account gap of $166.18 billion was wider than analysts' expectations of a $155.35 billion deficit and much worse than the upwardly revised $147.16 billion in the previous three months.
"You look at the current account numbers (for the past several quarters) and you cannot be all that surprised that the deficit has grown.
It was worse than expected so there was dollar weakness, but the trend is firmly in place," said Tim Mazanec, senior currency strategist with Investors Bank and Trust Company in Boston.
In late New York trade, the euro was trading near flat at $1.2253, according to Reuters data, up from around $1.2242 before the data were released but well off a session high of $1.2295.
Against the yen, the dollar slipped to 109.58 yen, down 0.5 percent. Against the Swiss franc, the dollar was down about 0.1 percent to 1.2587 francs. Sterling was flat on the day at $1.7967.
The current account, the broadest measure of a country's trade with the rest of the world, shows that the flow of dollars out of the United States is gathering pace, making the need for foreign capital inflows to plug that gap ever more acute.
"The current account deficit is now approaching 6 percent of GDP and rising fast," said Michael Woolfolk, senior currency strategist with the Bank of New York, in a research note.
"No major or emerging market country has ever sustained this level of external imbalance without eventually succumbing to a currency depreciation."
A separate report showed US retail sales in August were slightly below analysts' expectations. By and large, both the latest current account and retail sales data did not alter expectations that the Federal Reserve will continue to raise interest rates in a steady fashion.
"We knew that we had a disaster situation in the United States in the second quarter, so I don't think (the current account deficit) told us anything new. And the retail sales data weren't really inspiring one way or the other," said Lisa Finstrom, senior currency strategist with Citibank in New York.
"The market still is looking for (a rate hike of) 25 basis points in September and possibly another 25 in November," she said.
Higher US interest rates are viewed as dollar-supportive because they enhance the attraction of short-dated dollar deposits to foreign investors.
Retail sales fell 0.3 percent in August, compared with forecasts of a 0.1 percent decline and an upwardly revised 0.8 percent in July. Excluding autos, sales were in line with expectations, up 0.2 percent.
Comments
Comments are closed.