The New Nation - Internet Edition

AFP, New York

The dollar steadied yesterday after the prior day's bashing as the market weighed the prospect of a fresh cut in US interest rates and a jump in the US trade deficit.

Traders said the disappointing US trade data, which would normally be negative for the dollar, was shrugged off, meaning the US unit had probably benefited from a technical bounce.

The euro was at 1.4775 dollars around 2200 GMT, down from 1.4807 dollars late Thursday. The dollar was at 108.81 yen, down from 109.27 Thursday. In late New York trade on Friday, the dollar was at 1.1012 Swiss francs, down from 1.1028.

The pound was at 1.9564 dollars, down from 1.9613.

The dollar picked up from the battering it took Thursday after Federal Reserve chairman Ben Bernanke signaled the US central bank would lower interest rates to dampen the negative impact of a mortgage-related credit crunch on the world's largest economy.

Meanwhile his counterpart at the European Central Bank, Jean- Claude Trichet, warned that rates could be raised to counter inflationary pressures.

"We continue to believe that the Fed has already completed much of the rate cutting that will be needed as the US economy slows," said Patrick Fearon at AG Edwards.

The market appeared to ignore the US Commerce Department's report that showed the US trade deficit in November swelled 9.3 percent to 63.1 billion dollars, its highest level in 14 months, owing to record crude oil prices.

Sterling hit a new all-time low against the euro and 10- month trough versus the dollar on expectations of another interest rate cut from the Bank of England at its next meeting in February.

The factor apparently driving the foreign exchange market is the US Federal Reserve, which is expected to cut interest rates soon.

Many traders are banking on a half percentage point cut in the federal funds rate, to 3.75 percent, at a Fed meeting scheduled for January 29-30.

Rate cut expectations continued to trouble sterling on Friday, as the euro struck a record peak of 75.86 pence. The British pound meanwhile slumped to 1.9484 dollars-the lowest point since March 2007.