Dollar slides again after record deficit

The dollar slumped to a two-year low against the euro yesterday after a surge in the United States trade deficit raised fresh worries about the American currency.

The dollar slumped to a two-year low against the euro yesterday after a surge in the United States trade deficit raised fresh worries about the American currency.

Sterling also gained against the dollar, rising to a new 17-month high, following the release of data showing that the US trade deficit ballooned to a record $35.9bn in April, up from $32.5bn in March.

In New York, the US currency dropped to 96.45 cents against the euro, its weakest level since June 2000.

Traders said that the euro was now "within reach" of achieving parity with the dollar for the first time since February 2000.

In London, the pound strengthened by a third of a cent to reach $1.4974.

Concern about the dollar has been fuelled by worries that US growth may be running out of steam as consumer confidence begins to slip.

Growth is projected to fall from 5.6 per cent in the first three months of the year to an annualised rate of 2.9 per cent in the second quarter.

The widening trade deficit heightened fears that the dollar will be hit if the US cannot attract sufficient overseas investment to fund the deficit.

The euro has rallied by around 15 per cent against the dollar since the start of the year. Even so, the European single currency is still 20 per cent lower than when it was launched in January 1999.

Foreign exchange dealers said the US currency might have further to fall. "The world's lost confidence in the dollar," one said. Another said he saw a "fear phase" for the dollar, brought on by the weakness in US stock markets.

However, economists said the slide in the dollar since the beginning of the year might just help the flagging US economy rebound by making US exports more competitive and increasing profits made by US companies abroad.