The US current account deficit shrank in the fourth quarter of 2006 to its smallest in more than a year as lower oil prices took a bite out of imports and US exports continued to rise, a Commerce Department report showed today.
The quarterly shortfall of $195.8 billion was well below the midpoint estimate of $204.0 billion made by Wall Street analysts surveyed before the report. It was also the smallest since the third quarter of 2005, when it totaled $183.4 billion.
The fourth-quarter gap equaled 5.8 per cent of US gross domestic product, down from 6.9 per cent in the third quarter and the record of 7 per cent set in the fourth quarter of 2005.
The news helped boost the dollar to session highs against the yen today in trading after the report. US Treasury debt prices were little changed.
Steven Butler, director of foreign exchange at Scotia Capital in Toronto, said the smaller current account was just one of many factors traders were looking at as they gauge the Federal Reserve's next move on interest rates.
"The current account picture looks a little better, but CPI (consumer price index, due out Friday) is still going to be more important for future interest rate moves in the States going into the second half of the year," Mr Butler said.
Josh Stiles, bond strategist for IDEAglobal in New York, said markets also were looking forward to the producer price index report due out tomorrow.