The US dollar initially fell against the euro and yen, later recovering as a larger-than-expected US trade deficit prompted investors to debate the strength of the recovery in US manufacturing based on the export data. Figures showing a jump in imports of consumer goods and other products widened the US trade gap in February to $39.7 billion had a lesser impact on the greenback compared to a government report showing the closely watched bilateral deficit with China was its lowest in nearly a year.
The euro fell against the US dollar, reversing the morning's higher trend as investors refocused on problems in the Euro Zone, leaving aside earlier pessimism about US trade data. Results from a Greek Treasury bill auction showed the market still required a high premium to hold Greek assets. Greece easily sold its allocation of 6-month and 12-month T-Bills, raising 1.56 billion euros, with the inclusion of non-competitive bids, but at a yield which was costly for the debt-laden country. With the Greek bill auction behind it, sentiment towards the euro remains poor.
Sterling reversed early losses to trade slightly higher against the US dollar after data showed the UK trade gap narrowed more sharply than expected last month, easing some concerns about the economy. Britain's trade deficit narrowed to 6.179 billion pounds in February, its' smallest since June 2006, after exports rebounded strongly from weather-related weakness in January.
The Japanese yen slipped against the US dollar and other currencies after a draft by a panel of Japan's ruling party said it should try to keep the US dollar level against the yen around 120 yen. The dollar jumped as high as around 93.25 yen, erasing most of the day's losses after trading around 92.70 yen before the details of the draft were announced.
The Canadian dollar was little changed against the US dollar a day after reaching parity as investors continued to assess news of a massive European financial rescue package for Greece and awaited key US economic data later in the week. The Canadian currency also continued to receive support after Monday's Bank of Canada survey which pointed to an upbeat business mood, enhancing the market notion that the central bank would raise interest rates at midyear.
The Australian and New Zealand dollars fell from multi-month highs, with the Aussie falling by the most in seven weeks against the yen as investors took profits amid a more cautious market. Weakness in Asian stocks and commodity prices further raised the case for investors to be more cautious.
10-Year Treasury Note Yield: 3.820%
Dow Jones Industrial Average: 10,966.20 - 39.07