Dollar Erases Gains; Traders Judge Gain Versus Euro Excessive

By Anchalee Worrachate

Aug. 12 (Bloomberg) -- The dollar erased gains against the euro before a report that may show the U.S. trade deficit widened in June and as traders speculated the currency's biggest weekly advance in eight years last week was excessive.

The 14-day relative strength index for the euro-dollar fell to 20.10 today, the lowest since the euro's debut in 1999. The trade deficit widened to $62 billion, from $59.8 billion in May, according to economists in a Bloomberg survey. The dollar rose to a 5 1/2-month high against the euro earlier and the strongest in seven months against the yen.

``The risk here is that the dollar has risen too rapidly and my impression is that we are going to see a bit of consolidation,'' said Mitul Kotecha, global head of currency strategy in Hong Kong at Calyon, the investment-banking arm of France's Credit Agricole SA. ``That doesn't change our bigger picture. Overall, we remain bullish on the dollar.''

The dollar traded at $1.4917 per euro as of 10:24 a.m. in London, from $1.4909 yesterday, after rising to $1.4816 earlier, the highest since Feb. 26.

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net.