The dollar fell to a 2 1/2-year low against the euro as a tumble in US stocks crimped demand for the currency.
The dollar also approached a 17-month low against the yen as a government report showed the US trade deficit swelled to a record in May, heightening concern that the country won't attract enough investment to offset the money that rising imports are sending out of the country.
"[Friday's] numbers and declining stocks definitely add pressure on the currency," said Eric Nickerson, chief foreign-exchange strategist at Bank of America Corp. He's recommending investors sell dollars for euros because he forecasts the dollar will weaken to US$1.05 per euro within a year.
The US currency weakened to US$1.0151 per euro from US$1.0116 late yesterday as disappointing earnings and accounting errors drove the Standard & Poor's 500 Index down 3.8 percent to a five-year low. The dollar fell to ?115.65, less than 0.2 percent above its weakest level since February 2001, from ?116.50 Thursday.
For the week, the dollar slid 2.5 percent against the euro.
It's the 14th decline in 16 weeks against the euro and fifth in six weeks against the yen as stocks had their 16th drop in 18 weeks as the recovery slowed. The S&P 500 had its biggest two-week decline since October 1987.
"The dollar is trading with stock market movements," said Bill Sterling, chief investment officer at Trilogy Advisors LLC, which manages US$4.8 billion. The size of the trade deficit and a loss of confidence in corporate accounting are fueling "the trend for a lower dollar," he said.
On nine of every 10 days in the past three months, the dollar has moved in the same direction as US stocks.
The 12.5 percent decline in the dollar this year still leaves it almost 15 percent stronger than when the euro started trading in January 1999 at about US$1.17.
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