Dollar gets a boost from narrower trade gap

NEW YORK, Nov 9 (Reuters) The dollar rallied against the yen and pared its losses against the euro on Thursday after data showed the U.S. trade deficit narrowed by more than expected in September.

The euro slipped to around $1.2780 EUR=>, virtually wiping out its gains for the day after data showed that the U.S. trade deficit stood at $64.30 billion in September, narrower than forecasts for a deficit of $66 billion and down from a record wide gap in August of about $69 billion.

I'm not surprised we've seen a rally, as the data is better than expected,'' said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. ''On the technical side, given that we were testing the high side of the range on euro-dollar, I think we may see some follow-through dollar strength.'' The euro was trading at around $1.2795 before the announcement. The dollar also rose against the yen JPY=>, climbing to 118.55 yen from around 118.10 yen and extending its gains to be up 0.6 percent on the day.

Earlier in the session the euro had rallied across the board after European Central Bank Executive Board member Lorenzo Bini Smaghi said Europe's economic recovery is proceeding at a faster pace than foreseen and that current interest rates of 3.25 percent might be inadequate.

The euro Thursday hit another record high against the yen, and was up 0.7 percent at 151.30 yen after touching a peak of 151.39.

And in a volatile session, the New Zealand and Australian dollars both fell sharply after data showed unexpected drops in employment in both countries, cooling expectations for further rate rises from the antipodean central banks.

The kiwi dollar NZD=> was down almost 1 percent on the day at $0.6622, while the Aussie dollar AUD=> declined 0.8 percent to $0.7645.

REUTERS SBA HT1942