The dollar recovered slightly against the yen in Thursday morning trading in Asia after the United States on Wednesday reported a surprise narrowing in its trade deficit for March. The dollar was trading at 106.13 yen late morning in Tokyo, up 0.55 yen from late Wednesday and above the 105.74 yen it bought in New York later that day. The euro dipped to $1.2794 Thursday morning from $1.2892 and to 135.80 yen from 136.08 yen. The dollar advanced after the U.S. Commerce Department reported a much smaller than expected trade deficit in March, helping to ease come concerns about the U.S. economy. According to the report, imports to the U.S. exceeded exports by $54.99 billion, less than the $62 billion economists had predicted and down from a record monthly deficit of $60.57 billion in February. That means fewer dollars in the hands of companies that export goods to the United States, increasing demand for dollars. "It's a significant surprise, better than everyone expected. Everyone's buying dollars right now," said Thomas Stolper, global markets economist at Goldman Sachs in London. "But $54 billion is still a large deficit by all historic standards, and we don't think this movement is sustainable. We project further dollar weakness." The British pound fell to $1.8713 from $1.8822 the previous day after the Bank of England said it expected inflation to accelerate beyond its 2 percent target in the near term before falling back to the target in the first half of 2006.