The dollar had its biggest weekly decline in 10 months against the euro as investors sold US stocks on concern an economic recovery is slowing.
A widening trade deficit also drained money from the world's biggest economy, sending the dollar to its biggest weekly loss in three months against the yen.
Investors are "uncomfortable putting money in the US and are moving outside," said Ku Shin, who manages global stocks at Banc One Investment Advisors Corp in Columbus, Ohio, with US$132 billion in assets. "We are more interested in Asia and Europe," where the currencies are likely to keep rising, he said.
The dollar fell 2.6 percent this week against the euro, its sixth straight drop and the biggest weekly loss since August. It slid to US$0.9710 per euro, the weakest level since April 4, 2000, from US$0.9648 yesterday. It sank 3.2 percent this week to 1.5105 Swiss francs, reaching its lowest level since October 1999.
Against the yen, the dollar had its biggest weekly drop since March as Japan signaled reluctance to sell yen again to curb the currency's 9.5 percent rally this quarter.
The greenback declined 2.2 percent this week, reaching a seven-month low of Japanese yen 120.84 from Japanese yen 123.53 yesterday after Finance Minister Masajuro Shiokawa said it's "impossible to manipulate currencies with our force." It pared losses to trade at Japanese yen 121.07.
Declines in the dollar against 14 major currencies were sparked in part by a government report yesterday showing the US current account shortfall grew to a record US$112.5 billion in the first quarter. That gap, the broadest measure of a country's trade, is weakening the currency because the US is failing to attract at least as much investment back to offset it.
The US needs about US$1.5 billion a day to offset the money lost in the current account, according to Paul Donovan, deputy head of global economics at UBS Warburg in London.
The dollar's drop is a function of "Europeans pulling their money out of the US, more than Americans investing internationally," said Ivka Kalus-Bystricky, European equity specialist at Independence Investment LLC in Boston, which has US$2 billion in non-US stocks under management. The firm isn't hedging its European holdings for currency risk and is benefiting as the dollar falls, she said.
Kalus-Bystricky said she expects the dollar to reach US$1 per euro in weeks ahead.
Spurred by sagging US stock markets, investors are dumping dollars in the US$1.2 trillion-per-day currency market. Some are concerned the nation's consumer spending is abating while a series of corporate accounting probes suggest companies' financial reports are unreliable, analysts said.
"There is a lack of confidence in the US," said Stuart Kinnersley, who helps oversee US$4 billion at Nikko Global Asset Management. He has recently sold U.S. bonds and bought European bonds. "The dollar is going to remain lower."
All three major US stock indexes fell more than 1.5 percent today. The Standard & Poor's 500 Index, down 14 percent this quarter, is having its worst first half since 1970.
A Merrill Lynch & Co survey of 282 fund managers worldwide found they have less money invested in US stocks than at any time since February 2000.
Overseas investors bought a net US$17.6 billion in US stocks in the first quarter, less than half the US$41.7 billion in net purchases in the first quarter of last year, according to the latest Treasury Department figures.
Analysts estimate Japan's central bank has sold US$20 billion worth of yen on four days from May 22 to June 4 on concern its ascent against the dollar this quarter will erode the profits Japanese exporters earn on overseas sales.
The Bank of Japan's yen sales "haven't been very effective -- the overall market force driving the currency higher is too strong," said Banc One's Shin. After each of four rounds of selling in the past month, "the yen has recovered," and will probably rise to Japanese yen 120 per dollar within a month, he said.
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