The dollar snapped a three-day gain after the U.S. trade deficit widened in March to the highest level in more than six years, raising doubts that the economy was gaining traction.
The data, which showed the trade gap increasing the most in 18 years, followed a report last week that indicated U.S. growth stalled in first quarter. The focus turns to April payrolls data on May 8, as the Federal Reserve weighs whether the economy is strong enough to withstand the first interest-rate increase since 2006.
“The dollar is losing ground on a string of disappointments,” Alfonso Esparza, a senior currency analyst at Oanda Corp. in Toronto, said in a telephone interview. Weaker economic data suggest the Fed will wait until after June to raise rates, and “that change in expectations is bound to hurt the dollar,” he said.
The Bloomberg Dollar Spot Index, a measure of the U.S. currency against 10 major peers, fell 0.4 percent to 1,168.81 at 5 p.m. in New York after earlier gaining 0.4 percent. The dollar dropped 0.4 percent to $1.1185 per euro.
The yen gained for a second day, adding 0.2 percent to 119.86 yen per dollar.
Even with the decline, the dollar is up 18 percent over the past 12 months, the most among 10 major currencies tracked by Bloomberg Correlation-Weighted Currency Indexes.
The dollar slid after the trade shortfall jumped 43.1 percent to $51.4 billion, the largest since October 2008, according to Commerce Department figures, fueled by a record surge in imports as commercial activity resumed at West Coast ports following a resolution to labor disputes. It exceeded the highest estimate of 70 economists surveyed by Bloomberg.
The trade balance “shows the impact of a the strong dollar on cheapening the cost of imports and consumers just scooping them up -- and that’s not longer-term good for growth,” said Jonathan Lewis, a principal at New York-based Samson Capital Advisors LLC, which has $7.4 billion in assets.
The trade data comes a week after a report showed first-quarter gross domestic product grew 0.2 percent, and raises concern that a revised look at GDP may show the economy actually contracted. That would give scope for the Fed to keep interest rates near zero longer.
“The issue really relates to the GDP calculation and the bearing it has in terms of probability of a negative print in the first quarter,” Alan Ruskin, the global head of Group of 10 foreign exchange at Deutsche Bank AG in New York, said by phone. “It’s going to be much harder for the Fed to tighten, in particularly June or July, if we just printed a negative first-quarter GDP.”
The nonfarm payrolls report on May 8 will show employers hired 230,000 workers in April, up from 126,000 a month earlier, which was the least since 2013, according to a Bloomberg survey of economists.