Dollar slips moderately against euro, but gains on pound as US trade deficit narrows

2008-05-09 22:28:08 -

NEW YORK (AP) - The dollar fell in late trading Friday against most major currencies as markets continued to digest signals from European central bankers that they will keep interest rates higher than in the U.S.
In late afternoon trading in New York, the 15-nation currency gained to $1.5480 compared with $1.5404 Thursday.
The European Central Bank is expected to keep its interest rates steady at 4 percent, or even raise them to combat rising euro zone inflation. The U.S. Federal Reserve, on the other hand, has lowered its rates seven times in seven months to 2 percent, but is likely to pause for the time being.
Though lower interest rates can spur a nation's economy, they can weigh on its currency as traders transfer funds to countries where they can earn higher returns. Lower rates can also spur inflation _ a key concern of ECB officials.
The British pound, meanwhile, fell to $1.9519 from $1.9535 after the Bank of England ruled out a back-to-back decrease on its interest rate, leaving it at 5 percent.
«There's little of note on the economic calendar today but traders certainly had a lot to digest yesterday with signals from the ECB to contend with alongside a rate verdict from the BoE that had suddenly been open to debate after weeks of consensus that no change would be seen,» said James Hughes of CMC Markets.
The dollar managed to stay under $1.55 compared to the euro, however, as the Commerce Department said that the U.S. trade deficit narrowed in March, helped by shrinking imports.
March's deficit was $58.2 billion, down 5.6 percent from February.
In other trading, the dollar bought 103.09 Japanese yen, down from 104.17 yen, and also fell to 1.0067 Canadian dollars from 1.0176 and 1.0410 Swiss francs from 1.0523 francs.