950817

Dollar subdued in

Europe after

U.S. trade data

LONDON: The dollar was steady in European afternoon trade but came off the day's highs after news that the U.S. June trade deficit widened 2.4 percent to $11.31 billion from May's revised $11.05 billion.

Dealers had expected the trade deficit to narrow, and the news sparked a small sell-off in the dollar.

There was talk of at least one major U.S. fund selling dollars after the data but traders said the dollar was keeping its bullish tone.

"It's encountering interest at lower levels, there's no real aggressive selling," said a UK bank dealer in London.

By 1503 GMT the dollar was trading at 1.4770/75 marks and 97.90/98.00 yen compared with earlier highs of 1.4891 and 98.45. It finished Wednesday's European session at around 1.4748/58 marks and 97.70/75 yen.

Traders said it was not surprising there was a sell-off after the U.S. trade figures were announced. "You couldn't expect anybody to buy into those figures," said one dealer. "The market was looking for an excuse to sell and take some profits."

Sentiment was helped slightly by the August Philadelphia Federal Reserve business activity index swinging to plus 4.4 from -23.7 in July. Economists had been expecting -12.4.

European afternoon trade was hectic, but most of the business was interbank, dealers said.

"There isn't much customer order flow. People were hoping that business would continue to hold (from the previous two days)," said the UK dealer. "The market looks like it's running out of punters."

Dealers said the dollar's downside would remain limited by fears of fresh central bank intervention.

Tuesday's intervention by the Bundesbank, Federal Reserve, Bank of Japan and Swiss National Bank had left a market long in dollars but wary of shedding them, traders said.

"Our outlook continues to be that the dollar will appreciate, particularly against the mark," said Marian Bell, economist at the Royal Bank of Scotland here. "This is just a short-term retracement."

One analyst said the dollar could go as low as 95.45 yen and 1.45 marks before pushing upwards to targets of 110 yen and 1.58 marks.

Whether these future levels could be maintained would depend on the action of long-term investors.-Reuter