On the radar of foreign-exchange traders today: The U.S. trade deficit expanded at the fastest rate in five months during the month of August, increasing 15.6% to $48.3 billion, according to data released by the U.S. Department of Commerce on Tuesday morning. The trade deficit is the amount by which net imports of goods and services exceeded net exports.

One of the causes was a surge in iPhone imports, which helped raise the trade deficit with China by 11% to $35 billion. (Apple is a U.S. company, but iPhones are assembled in China with components made in Taiwan, so they are counted as an export from China.)

The following graph shows the U.S. trade deficit for the three-year period through August (blue line) against the real-trade weighted U.S. dollar index (an index of the value of the dollar against other world currencies, yellow line).

As you can see, the rise in the trade deficit this year has coincided with the upward trend in the dollar: As the dollar strengthens, U.S. imports become cheaper in dollar terms, while exports become more expensive for buyers paying in a weakened local currency. (The U.S.' largest trading partner is the European Union, followed by Canada and China.)

Meanwhile, Federal Reserve bank of Kansas City president Esther George did not comment on the economy or monetary policy during her speech in Chicago this morning, so traders were unable to glean any clues about policymakers' thinking. As such, they'll be eager to find out what San Francisco Federal Reserve bank president John Williams had to say in his "outlook speech," which began at 3:30 p.m. EDT.

Like nearly all financial market professionals worldwide, foreign exchange market participants are anxiously awaiting word on the timing of the Fed's first post-crisis interest rate hike. When the policy interest rate increases, the dollar naturally becomes more attractive relative to other currencies.

Last week's dismal employment report for the month of September has quashed the market's expectation of a rate hike this year. The dollar is now looking at its longest slide since the ructions of August, according to Bloomberg.

The EUR/USD rate (CURRENCY: EURUSD) was quoted at $1.1274 at 4:23 p.m. EDT, up 0.78% (i.e., the dollar has weakened on the day, since the rate is quoted in dollars). The dollar also lost ground against the British pound (the GBP/USD (CURRENCY: GBPUSD) is up 0.55% to $1.5233 this afternoon) and the Swiss Franc (the USD/CHF (CURRENCY: USDCHF) is down 0.97% to 0.9666 CHF).