The euro widened its losses against the dollar on Wednesday, after a report showed that US trade deficit widened more-than-expected in March.

EUR/USD dipped to a session low at $1.4325 on EBS, and was last trading at $1.4343.

“Following Standard & Poor's downgrade of Greece's credit rating yesterday, market focus has reverted to the debt crisis in peripheral Eurozone nations - this, coupled with ECB President Trichet's statements last Thursday which proved dovish relative to consensus expectations, has weighed on the single currency in recent trading sessions,” said a note from BNY Mellon on Wednesday.

A report from US Commerce Department showed that the nation’s trade deficit widened to $48.20 billion in March compared with downwardly revised $45.4 billion in February. Markets had expected the deficit to rise to $47 billion in the month.

The report showed the exports from the country increased by 4.6 percent in March month-on-month, the biggest monthly gain since March 1994. Imports went up by 4.9 percent, the highest since September 2008.

“Greece news likely to weigh on EUR short-term. Correction in EUR/USD aided by extreme positioning. Only if the periphery picture derails the ECB in its normalization process will there be a significant medium term impact on EUR,” said a note from RBS.

The greenback also pared losses against the Canadian dollar, easing off from five-day low following the release of trade data.

USD/CAD hit 0.9550 during early New York trading session, pulling back from the lowest level of 0.9514 reached on May 4.

“It appears likely that relative fundamentals will become more important in driving global FX markets in the weeks ahead. With liquidity creation continuing, we find little reason to anticipate a major, ongoing correction in risk appetite,” RBS said.

For the USD, we remain more upbeat on the economy than the consensus for later 2011, but the current deterioration in interest rate expectations and recent short-covering leave little upside, RBS added.

However, the British pound traded higher against the dollar, after the Bank of England (BoE) raised its medium-term inflation forecast, renewing speculations over the interest rate hike.

“BoE's Quarterly Inflation Report (QIR) was not as dovish as the market was expecting and indeed the report outlined a higher near-term inflation profile with upside risk from energy prices,” RBC Capital Markets said in a note.