Sun, Mar 13, 2005 - Page 10 News List

Dollar skids lower on concern about US budget shortfall


The US dollar skidded lower on Friday after the US trade deficit in January turned out wider than expected, accentuating market concerns about Washington's ability to finance the shortfall.

The euro rose to US$1.3454 at 10pm GMT from US$1.3413 on Thursday in New York. The dollar fell to ?103.98 from ?104.14 on Thursday.

Washington's trade gap widened by 4.5 percent in January to a seasonally adjusted US$58.3 billion, the second highest on record and bigger than the US$56.5 billion shortfall predicted.

"The release of the worse-than-expected trade deficit has been naturally negative for the dollar," said Kristjan Kasikov, currency strategist at CALYON.

The dollar shed over 2.5 percent of its value this week on renewed concerns about the US' budget and current account deficits and mounting speculation that countries around the world would diversify their foreign exchange reserves away from the US currency.

The near-term outlook for the dollar does not appear to be any better ahead of next week's US Treasury portfolio inflows data.

"Given our view that next week's [inflows] report is likely to reveal a fall in January net portfolio inflows to just US$51 billion, we think downward pressure on the dollar is likely to be maintained going into next week," Kasikov said.

In late New York trade, the dollar stood at 1.1508 Swiss francs from SF1.1534 Thursday.

The pound was trading at US$1.9248 after US$1.9220 late on Thursday.

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