- NEW YORK (Reuters) -- The
dollar fell broadly on Friday, weighed by a report that showed the U.S.
current account gap widened more than expected in the first quarter.
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- By mid-morning in New York trade, the dollar deepened
its descent in thin pre-weekend trade that was partly technically driven,
traders said.
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- The wide current account deficit -- the broadest measure
of the nation's global trade -- has been a persistent weight on the dollar
over the past two years.
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- "The dollar is weakening a little bit, which would
be in line with the notion that a (wider) deficit would raise concerns
about the U.S. capacity to fund that deficit," said Jason Bonanca,
foreign exchange analyst with Credit Suisse First Boston in New York.
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- The U.S. current account deficit widened to a record
$144.9 billion in the first quarter, exceeding economists' forecasts of
a $141.0 billion gap. The deficit is a reflection of more money being switched
out of dollars into other currencies to buy foreign goods and services
than is flowing into dollars as other countries buy U.S. exports.
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- The euro climbed to session highs around $1.2120 according
to Reuters data, up about 0.6 percent on the day. The euro earlier hit
six-week lows against the yen of 131.09 before retracing some of those
losses.
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- Against the yen , the dollar fell about 0.8 percent to
108.68 yen.
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- Against the Swiss franc, the dollar fell about 0.7 percent
to session lows around 1.2431 francs.
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- Sterling rose 0.3 percent to $1.8390.
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- Traders also cited technical moves for the dollar's decline
against the euro. "There has been some model fund buying of euros
that has driven" (the euro higher), said Grant Wilson, senior foreign
exchange trader with Mellon Bank, Pittsburgh. "We took out some light
stops (stop loss orders) on the way up ... trade has been driven by speculative
flows," he said.
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- Thursday's stronger-than-expected U.S. producer prices
for May and the Philadelphia Fed June manufacturing survey added fuel to
the debate over the pace of Federal Reserve rate hikes later this year,
although markets seem to have settled on a quarter-point rise this month.
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- The euro, which had attracted funds because of higher
interest rates compared with the dollar and the yen, appeared to be the
loser from such talk. Markets expect the euro zone to trail others in the
global tightening cycle.
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- The Federal Reserve is expected to raise official U.S.
rates by 25 basis points later this month. The market is also speculating
the Bank of Japan will end its hyper-loose monetary policy some time next
year.
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- Analysts are closely watching the outlook for prices
in the United States, after recent comments on inflation by top Fed officials
prompted sharp swings in market expectations over how much rates would
rise in the near-term.
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- On Friday, European Central Bank Executive Board member
Tommaso Padoa-Schioppa was slated to speak in London, while ECB board member
Gertrude Tumpel-Gugerell was scheduled to speak in Linz, Austria.
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- - Burton Frierson in London contributed to this report
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