Current account deficit hurts US dollar
March 14, 2006
The US dollar declined in value on Tuesday on the release of current account deficit data from the fourth quarter of last year, and on a prediction that interest rates in the US could peak at 4.75 to 5 percent.
Investors did not seem to take the current account numbers into consideration last year as the dollar gained 15 percent versus the euro and the yen, but these new numbers, which showed that the fourth quarter current account deficit totaled 7 percent of the gross domestic product triggered some selling of the dollar. One analyst called attention to the fact that this is twice the 3.5 percent of the GDP in 1985 which spurred the G7 to devalue the dollar.
The greenback lost 1.2 percent to ¥117.36 against the Japanese currency. It lost 0.9 percent versus sterling to $1.7475, dropped 0.8 percent in relation to the Swiss franc to SFr1.301, and declined 0.5 percent to $1.2020 against the euro.