The US dollar takes a pounding over deficit

[spindrifter]

By Steve Johnson in London and John Authers in New York
Published: May 12 2006 19:54 | Last updated: May 13 2006 00:18

The US dollar suffered a severe sell-off on Friday, taking it to its weakest level against a trade-weighted basket of currencies since October 1997, in a tumble that helped to trigger falls across world equity markets.

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The dollar has lost 7 per cent against the euro, yen and sterling since the start of April – a slide that will in turn intensify worries about inflation in the economy. Traders are concerned about the role a weaker dollar will have in correcting the US current account deficit, which is now about 7 per cent of GDP.

Marc Chandler, economist at Brown Brothers & Harriman in New York, said: “Precisely what officials feared would happen from the large global imbalances is now taking place in reaction to their clumsy attempt to ‘fix the problem’. Volatility in the capital markets is rising. Global equities are tumbling.”

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http://news.ft.com/cms/s/6fb3c8c4-e1e6-11da-bf4c-0000779e2340.html

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Bushonomics--another failure.