The 16-nation euro traded at $1.2875, up from $1.2862, while the British pound gained to $1.3940 from $1.3909.

The dollar edged down to 97.96 Japanese yen from 97.99 yen.

On Friday, the Commerce Department said the U.S. trade deficit dropped to a six-year low in January as imports, especially of crude oil, slid. The trade imbalance stood at $36 billion in January, down nearly 10 percent from the month prior. It stands to contract from last year if the pace keeps on _ even as American exports are dropping, imports are falling even more sharply.

In 2007, the trade deficit narrowed after setting records for five years in a row.

A smaller trade imbalance is a long-term positive for the dollar, said Bank of New York Mellon Corp. senior currency strategist Michael Woolfolk.

The trade deficit with China rose 3.5 percent, however, to $20.6 billion.

Meanwhile, Chinese Premier Wen Jiabao warned the U.S. that it needs to recognize the value of a strong dollar to help underwrite the value of the bonds it is selling to finance huge increases in government spending, such as the $787 billion stimulus.

China holds about $1 trillion of U.S. government debt. A weak buck would erase some of the value of that reserve.

The dollar tilted lower, however, as markets traded nearly flat.

Stronger overseas markets and economic data often encourage investors to expatriate investments from the safe haven of the dollar, diminishing its value.

In other New York trading, the dollar rose to 1.1892 Swiss francs from 1.1880 late Thursday, and slipped to 1.2736 Canadian dollars from 1.2788.