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EDITIONS
Friday, 21 June, 2002, 14:38 GMT 15:38 UK
Dollar plunges as investors flee US
Euro and dollar notes
The euro stages a rally against the dollar
The dollar has fallen sharply for the second day in a row, battered by weak stock markets and economic data in the US.

From $0.9574 late on Wednesday, the European single currency surged as high as $0.9669 in early trading on Friday.

The euro has risen 8.5% against the dollar this year, and has gained more than four cents in the past month.

The dollar also hit new lows against the yen and sterling, which rose above $1.50 for the first time since the beginning of 2001, and against the Swiss franc, which hit 30-month highs.

The main cloud hanging over the dollar concerns the drooping US stock market, which is persuading many international investors to shift their money into European and Asian shares.

News on Thursday that the US current account deficit had mushroomed to a record $112.5bn in the first three months of the year, indicating that ever more money is being siphoned out of the US, also weighed on the greenback.

Investors shun US shares

"If the market ever needed convincing the US dollar is overvalued, it received it in spades [ with the data]," said Sal Guatieri, economist at the Bank of Montreal.

Euro/dollar exchange rate
The trade deficit figures came in ahead of most analysts' forecasts, and marked an 18.3% increase on the current account gap for the last three months of 2001.

The rise in the first quarter current account deficit was fuelled partly by a sharp fall in spending on US shares by private foreign investors, reflecting concerns over the earnings prospects of US corporations.

Energy demand

Separate figures showed that the US trade deficit in goods and services for April widened to $35.9bn, itself a new monthly record.

The April trade deficit - which measures spending on goods and services, but excludes financial flows from stock and bond purchases - partly reflected an increase in spending on oil imports.

The US trade deficit with Japan grew to $6.8bn from $5.71bn in March, while the shortfall with the European Union widened to $5.14bn from $4.42bn.


Economic indicators

Fears and hopes

US Fed decisons

IN DEPTH
See also:

09 May 02 | Business
17 Apr 02 | Business
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