Dollar Hits on Deficit Fears

Dollar Hits 5-Month Low on Risk Appetite, Deficit Fears

The dollar hit a five-month low against a basket of major currencies Friday and the euro rose above $1.41 for the first time this year as investors bought higher-yielding currencies and assets on hopes of a global economic recovery.

Sterling approached $1.62, almost an eight-month high, and capped its best month since 1985, while data showing the U.S. economy shrank less than expected in the first quarter lifted global stocks and dulled the dollar's safe-haven allure.

Concern about the expanding amount of debt needed to fund a record $1.8 trillion U.S. budget deficit added to dollar woes this week and put the benchmark 10-year Treasury yield en route to its biggest two-month spike since 2004.

Those worries amplified a report that South Korea's National Pension Service intends to reduce exposure to U.S. government bonds and equities in its five-year portfolio.

"There's a visceral concern about the debasement of the U.S. currency because the United States has a lot of debt to finance" and may have to print more money to do it, said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Conn.Full Story