Dollar Rangebound as Trade Deficit Higher Than Expected

by: David Jackson

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

A New High — for the Trade Deficit [Business Week] and China's Foreign Currency Reserves Surge to Almost $1 Trillion [Bloomberg]

Summary: The dollar initially slipped in response to the trade deficit report, but then recouped its losses and remained in a narrow band. The trade gap widened to $69.9 billion in August, 2.7% higher than in July and higher than economists' median forecast of $66.6 billion. Imports rose 2.4% following a gain of 0.9% in July, while exports rose 2.3% following a decline of 1.3% in July. Import growth was driven by a rise in oil import volumes and pricing. Economists trimmed their Q3 GDP estimates as they revised up their import projections. China's trade surplus with the US rose 12% to a record $21.96 billion for August, pushing its reserves to almost $1 trillion. Chinese premier Wen Jiabao has admitted that reserves have caused a surge in the money supply that triggered a credit-fuelled investment boom.
More commentary on the dollar: ECB Raises Rates, Dollar Doesn't WeakenSignificance of the Surprisingly Weak YenConsumer Confidence is Helping the DollarWill Debt Payments Drag Down GDP or the Dollar?Chart of Euro versus the dollar (via the ETF).
Potentially impacted currency ETFs: CurrencyShares Euro Trust Euro Currency (NYSEARCA:FXE), CurrencyShares Swiss Franc Trust (NYSEARCA:FXF), CurrencyShares Mexican Peso Trust (NYSEARCA:FXM), CurrencyShares Swedish Krona Trust (NYSEARCA:FXS), PowerShares DB G10 Currency Harvest Fund (NYSEARCA:DBV) , CurrencyShares Australian Dollar Trust (NYSEARCA:FXA) , CurrencyShares British Pound Sterling Trust (NYSEARCA:FXB).

Seeking Alpha is not affiliated with Business Week or Bloomberg

Seeking Alpha's Wall Street Breakfast summarizes today's key market- and stock-moving news. Receive it by email every weekday morning (free/no spam).