NEW YORK (AFP) -- The dollar shook off a weak report on the U.S. trade deficit and held generally steady Thursday as investors sought safety in the greenback from market turmoil. The euro meanwhile faced pressure amid increasing speculation that the eurozone will not be able to escape a recession later this year.

At 2100 GMT, the euro was at 1.3969 dollars, coming off an early low of 1.3882 dollars -- its weakest level in nearly a year. The euro had traded at 1.3976 dollars in New York late on Wednesday.
The dollar meanwhile eased back to 107.05 yen from 107.81. The greenback withstood a report showing the U.S. trade deficit rose sharply to 62.2 billion dollars in July, the largest gap in more than a year, amid high oil prices and surging Chinese imports.
While a worsening of the trade balance could undermine the dollar, some said the underlying trends were positive and that the report was skewed by energy costs, which have since fallen sharply.
""The energy situation has already been unwound and there could be a massive cut in the trade deficit was that works through the August and September numbers,"" said Joel Naroff at Naroff Economic Advisors.
Terri Belkas at Forex Capital Markets said the dollar has been rising on expectations that the interest rates would be cut in Europe bit hold steady in the United States.
""The dollar's strength may only be able to last so long, though, as fed fund futures shifted today to price in a mild 10 percent chance of a 25 basis-point rate cut on September 16,"" she said.
""The odds still remain wildly in favor of neutral policy through the end of the year, but with the markets now speculating over the possibility of the rate cut, it will become harder to justify remaining dollar bullish in coming days.""