NEW YORK, Jan 12: The dollar steadied on Friday 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 around 2200 GMT, down from $1.4807 late Thursday.

The dollar was at 108.81 yen, down from 109.27 Thursday.

The US dollar edged marginally higher on the day's currency trading, but the euro nonetheless finished near its highest levels in two months -- showing few signs of slowing its advance against the dollar, said David Rodriguez, an analyst at Forex Capital Markets.

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.

As economic weakness spreads abroad, we think the major foreign central banks will have to cut rates much further, and this should make the major foreign currencies look less attractive, he said.

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

The dollar's rebound today comes even after US economic reports that were negative-to-neutral for the greenback, Fearon said.

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 per cent, at a Fed meeting scheduled for January 29-30.---AFP