In the currency market, the dollar was strong against the euro. Late Tuesday, the euro was trading at $1.3187 vs. $1.3373 on Monday.

The Commerce Department reported that the U.S. trade balance plunged by 29% to $40.4 billion in November, largely on a record decline in oil prices, assisted by much weaker demand for imports. At the same time, exports dropped 5.8% to $142.8 billion, led by weakening foreign demand for industrial supplies and capital goods.

“Trade flows have been crushed by the credit crunch, which has reduced demand for traded goods and services and made it more difficult for exporters and imports to obtain trade finance,” wrote Ian Shepherdson, of High Frequency Economics..

Ashraf Laidi, chief market strategist at CMC Markets, wrote that, “The 6% decline in U.S. exports is another sign of slowing global growth in the face of weakening global currencies against the US dollar.”

Traders still have one eye on Thursday’s European Central Bank meeting. Currency markets turned sour on the euro “at the start of 2009, and the credit headlines on European governments only reinforces this euro-skeptic market attitude,” wrote strategists at KBC Bank in Brussels.

And technicians at Brown Brothers Harriman wrote that, “Euro sentiment deteriorated further on the break of $1.3240, which points to a retest of the October low of $1.2331.”

Source: Dollar Still Surging Against Euro