* Upbeat U.S. trade data helps turn dollar around
* Dollar index hits one-month high, reverses losses
* Canadian dollar sold off on renewed worries about economy
By Ian Chua
SYDNEY, Jan 8 The dollar hovered near a
one-month high against a basket of major currencies early in
Asia on Wednesday, having rebounded smartly overnight on the
back of upbeat U.S. trade data.
The dollar index rose as far as 80.946, reaching
highs seen in early December after the United States posted its
smallest trade deficit in four years as exports hit a record
high. It last stood at 80.875.
In contrast, investors dumped the Canadian dollar on news
that activity by purchasing managers nosedived unexpectedly in
December, while the country's trade deficit was far larger than
That saw the greenback jump more than 1 percent to C$1.0782
, the highest since mid-2010, making the currency pair a
standout mover overnight.
The dollar also strengthened against the euro, which slipped
to $1.3613 from a high of $1.3657. On the yen, the
greenback rose to 104.69, pulling further away from
two-week lows of 103.91 set on Monday.
The common currency firmed against the yen as well, drifting
up to 142.45 from a three-week trough of 141.50
plumbed on Monday.
Demand for the safe-haven yen eased off after Wall Street
scored its first positive session for 2014 with the S&P 500
index ending 0.6 percent higher.
David Rodriguez, strategist at DailyFX, noted the strong
positive correlation between dollar/yen and the S&P 500 index.
"And though stocks remain near all-time highs, these
strengthening links suggest that the first sign of danger could
spark a stampede from popular currency and equity market trades
alike," he warned.
"If we see sharply negative reactions to the highly
anticipated ECB rate decision or U.S. non-farm payrolls report,
we could see the S&P 500 pull back sharply and the yen trade
The European Central Bank meets on Thursday for the first
time in 2014, but is likely to do no more than warn of its
readiness to act in the future despite yet another surprise fall
in euro zone inflation.
Data on Tuesday showed annual euro zone inflation dipped to
0.8 percent in December from 0.9 percent in November, while the
core reading hit a record low of 0.7 percent, staying well under
the ECB's target of just below 2 percent.
Markets are also keenly awaiting U.S. jobs data on Friday.
Analysts polled by Reuters expect the world's biggest economy to
have created 196,000 jobs in December.
Any unexpected strength could fuel market speculation that
the Federal Reserve might speed up its plan to scale back its
bond-buying stimulus, a positive for the U.S. dollar.
Fed officials, though, have been at pains to play down such
thoughts. Boston Fed President Eric Rosengren and San Francisco
Fed President John Williams said on Tuesday they expected the
U.S. central bank to reduce stimulus at a steady pace.
The firmer greenback briefly knocked the Australian dollar
below 89 U.S. cents, although good buying interest there helped
lift it back to $0.8916.
The Aussie dropped more than 14 percent against the U.S.
dollar last year, partly due to persistent jaw boning by
Australia's central bank, which has made clear it wanted a
weaker currency to drive the economy. It has already cut
interest rates to a record low 2.5 percent.