LONDON, Feb 13 - The dollar tumbled to an 11-year trough on sterling and held within a cent of a record low on the euro on Friday, weighed down by expectations U.S. interest rates will remain low and nervous ahead of U.S. trade data. It also hit its weakest level in seven years versus the Australian dollar, as investors poured funds into higher- yielding currencies, and held near this week's three-year trough on the yen. Expectations that U.S. rate rises were still a way off intensified after Federal Reserve Chairman Alan Greenspan said this week he was not overly concerned with the dollar's decline and its potential to spark inflation. "Greenspan's comments are still reverberating. The underlying idea still is that U.S. rates will be on hold and the fiscal position is worrisome," said Steven Pearson, chief currency strategist at Halifax Bank of Scotland Treasury Services.
"Today's focus would be on trade numbers. The data will confirm the trend of substantial improvement (in the US trade gap) due to strong demand in Asia but on a monthly basis we might get retracement. In the short-term it might not be particularly positive for the dollar." By 0852 GMT, the dollar was trading at $1.2804 per euro , steady compared with late New York levels on Thursday and within a cent of its record low of $1.2898 set in January. Against the yen it was riveted to tight ranges near 105.36 , just above Wednesday's three-year low around 105.15.
Sterling hit $1.8971 , its highest since September 1992, before pulling back slightly to $1.8930. The Aussie rose as high as US$0.7924 . The U.S. trade data, due at 1330 GMT, is likely to show the trade deficit widened in December as increasing domestic demand for imports outpaced the effects that the weaker dollar has had on growing exports.
DATA, JAPAN
University of Michigan consumer sentiment, due at 1445 GMT, is expected to have fallen slightly in February after strong numbers in previous months. U.S. import and export prices for January are due at 1330 GMT. U.S. financial markets will be shut on Monday for the Presidents Day holiday. The euro zone will have a flash estimate of fourth quarter growth at 1100 GMT. In Japan, officials kept their usual warnings against rapid strengthening of the yen.
Japanese Finance Minister Sadakazu Tanigaki said the country's intervention in currency markets was not aimed at keeping the yen at a particular level, but that it would take decisive steps against excessive moves. Investors remain wary of the willingness and ability of Japan's financial authorities to intervene to prop up the dollar. In January alone, they spent a record seven trillion yen ($66.45 billion) on intervention. "There must be some very keen defence of dollar/yen around 105.30," said Jake Moore, senior currency strategist at Barclays Bank in Tokyo. "At the moment there is no coordinated intervention and it seems unlikely that there will be. Japan would love it, it would be very favourable for their policy. That said, people are getting nervous that the ECB could intervene in the months ahead. I personally don't think they will."//