The dollar hovered near a two-month low against the euro on Friday as markets awaited key data on the United States' trade gap. US trade figures, due at 1330 GMT, are expected to show the deficit widened to $56.5 billion in January, the second highest shortfall on record. Concerns over the huge trade imbalance dragged the dollar to record lows against the euro at the end of last year and have helped push the US currency through key chart support levels this week.
Signals that central banks may diversify out of US assets have also weighed on sentiment.
"Euro-dollar is treading water ahead of the US trade data and there really haven't been a lot of events this morning to cause it to break out of that range," said Monica Fan, senior currency strategist at Royal Bank of Canada Capital Markets.
Fan said recent bilateral trade data from China could mean the US deficit could be smaller than forecast, which could give the dollar a boost.
The dollar was steady at $1.3414 to the euro at 1246 GMT, less than half a cent above two-month lows hit on Thursday, having traded in a narrow range between $1.3402 and $1.3446. The dollar was also little changed at 104.12 yen.
Dollar sentiment was impacted after India's central bank governor said diversification of its foreign currency holdings was being discussed within the bank and was a subject of ongoing debate among all central banks.
India's foreign exchange reserves are at a record high of $135.66 billion, and are the sixth largest in the world.
The United States needs roughly $2 billion a day of foreign capital inflows to plug its current account deficit, and investors are sensitive to any signs that funding that deficit may be getting more difficult.
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