The deficit widened to $164.71 billion, a record peak but only slightly bigger than the revised second-quarter reading of $164.39 billion and below forecasts for $166 billion. That caught off guard dollar bears betting on a larger figure.
The trade shortfall still runs at a historically big 5.6 percent of the total U.S. economy, and most analysts believe that worries about the United States' ability to finance it are likely to keep the dollar under selling pressure.
But with year-end holidays approaching and little significant economic data on the near-term horizon, the market is starting to settle into a lull until 2005 kicks off.
"Speculators were closing dollar short positions," said a trader at a Japanese bank. "I think this year's market is essentially over already. The rest of the year will see range-bound trade."