* Fed's Rosengren said stimulus should only be removed
* Swiss franc falls sharply as reserves data weighs
* Euro resists more falls, helped by inflation data
* Focus this week on Fed minutes, U.S. jobs data
By Julie Haviv
NEW YORK, Jan 7 The dollar rose broadly on
Tuesday, buoyed by U.S. trade deficit data that could inflate
estimates for fourth-quarter growth in the world's largest
economy as market participants eye key events later in the week.
The U.S. trade deficit fell to its lowest level in four
years in November as exports hit a record high and weaker oil
prices restrained import growth, the latest evidence of
strengthening economic fundamentals.
The measure goes into the calculation of gross domestic
product, so the narrowing of the deficit could prompt economists
to bump up their growth estimates for the last quarter of 2013.
"Since 2013, the trade balance has been spiky and
narrowing," said Patrick Newport, U.S. economist at IHS Global
Insight in Lexington, Massachusetts.
"Net trade will be a positive for growth in the fourth
quarter, but a negative this year as a pickup in U.S. growth
brings in more imports," he said.
Signs of more robust growth could also prompt the Federal
Reserve to speed up the tapering of its monthly bond purchases,
but most contend the U.S. central bank will gradually wind down
its monetary stimulus.
Boston Federal Reserve Bank President Eric Rosengren, one of
the Fed's most dovish policymakers, on Tuesday said the economy
remains vulnerable the longer inflation remains too low and he
again warned that policy stimulus should be removed "only
In midday trade, the dollar was 0.3 percent higher at 104.54
yen, but remained below a five-year peak of 105.44 yen set last
week. The dollar fell as low as 103.88 yen on Monday, its
lowest since Dec. 23.
The dollar index, which tracks the greenback against
a basket of six major currencies, was last up 0.2 percent at
The Swiss franc, meanwhile, fell to its lowest against the
euro since October, with some analysts arguing global economic
optimism had laid the ground for a retreat for the one of the
world's safe-haven currencies.
Data on Tuesday also showed Swiss National Bank foreign
currency reserves fell by almost 700 million francs in December,
suggesting pressure on its cap on the franc - which previously
forced it to buy billions of euros - had eased.
"It further underscores the bank's resolve to fight Swiss
franc appreciation and could make alternative measures like
penalty rates on bank excess reserves or negative policy rates
more attractive," said Valentin Marinov, G10 strategist at
CitiFX, a division of Citigroup.
The euro rose 0.4 percent to 1.2364 francs, its
highest since October and above the 1.20-per-euro cap which the
SNB has held in place for more than two years. Against the
dollar, the franc also lost 0.3 percent to $0.9070.
"We expect more Swiss franc downside from here given that
the Swiss franc remains excessively overvalued," Marinov said.
"The firm prefers to express any bearish view against the dollar
rather than the euro."
UBS pointed to signs that Swiss funds and banks are
beginning to invest and loan money abroad again - something they
have not done since 2008 and an important precondition for the
franc falling back.
"People tended to play the weaker franc last year and a lot
of them got frustrated. Now there may be a new attempt," said
Beat Siegenthaler, currency strategist with UBS.
"The question has always been what would be a trigger (for a
turnaround in the franc). It could have been the easing of the
euro crisis and that didn't happen. So maybe it is the change in
the U.S., the feeling of broader optimism and change in the
dollar that may come from economic improvement there."
UBS has a near-term target of 1.25 francs to the euro,
Looking ahead, currency trading will likely be swayed by
Friday's U.S. jobs report, which may give a clue as to how
quickly the Fed will taper its bond buying. Overall the outlook
on interest rates is against the euro.
Ahead of the jobs data, market participants will focus on
minutes from the Fed's last monetary policy meeting, scheduled
for release on Wednesday.
Meanwhile, the euro was helped by a euro zone inflation
number which was not expected to be low enough to force the
European Central Bank into more action immediately to loosen
monetary policy. The ECB meets on Thursday.
German retail sales and unemployment data were also better
than expected, while Ireland's successful bond issue offered
more optimism on countries in the bloc under sovereign bailout
The euro rose as high as $1.3656, but last traded
down 0.1 percent at $1.3618, remaining above Monday's one-month
low of $1.3570, according to Reuters data.