The dollar shuttled in narrow ranges near two-year highs against the euro and the yen on Thursday as dealers awaited trade figures to provide short-term direction for the US currency.
The market was focused on how much soaring energy prices had boosted the US trade deficit in September, due at 1330 GMT, with economists in a Reuters poll forecasting a record $61.0 billion. The deficit came in at $59.03 billion in August.
Some dealers said that even a surprisingly large gap would not derail the dollar's rally this year, which has gained steam since the beginning of November.
"As long as it's not massively worse than expected the trade data isn't going to disrupt the dollar positive environment," said Luke Waddington, head of forex dealing at Royal Bank of Scotland in Tokyo."There's been a big change from last year, when people would just automatically dump the dollar when the trade data was weak."
The dollar's widening yield advantage has helped to lift it to two-year highs of 118.38 yen and $1.1710 per euro this week.
The dollar index has rebounded 13 percent in 2005, arresting a three-year, 30 percent decline driven by worries about the United States' ability to fund its gaping deficits.
The euro was buying $1.1760, little changed on the day after falling for five straight sessions.
The dollar edged up to 117.70 yen.
The dollar has gained around 7 yen in the past two months, partly due to Japanese investors' voracious appetite for higher-yielding foreign bonds, which has outweighed steady overseas inflows into the Japanese stock market.
Japanese investors snapped up 713.5 billion yen ($6.07 bln) of foreign debt last week, their largest net buying in a month, data from Japan's Finance Ministry showed on Thursday.
The yen momentarily dipped to the day's low of around 117.80 per dollar after data showed Japanese machinery orders fell 10 percent in September from the previous month, worse than expectations for a 7 percent fall in the volatile indicator. Sterling was down 0.2 percent at $1.7405.