Dollar keeps dropping as investors hunt for high yields; trade deficit wider despite weak buck

Dollar decline continues as trade deficit widens

NEW YORK — The dollar dropped Friday after the government said the trade deficit widened in September, while the 16-nation eurozone officially emerged from recession, luring investors away from the safe-haven dollar.

The buck has declined steadily since spring despite statements of support from government officials. Record-low U.S. interest rates and a recovering global economy encourages investors to transfer funds out of the safety of low-yielding dollar-denominated investments such as Treasurys and into higher-yielding assets like stocks, commodities and emerging-market currencies.

In late New York trading Friday, the 16-nation euro rose to $1.4893 from $1.4866 late Thursday, while the British pound jumped to $1.6672 from $1.6570. The dollar slipped to 89.63 Japanese yen from 90.32 yen.

The dollar also trudged lower against emerging-market currencies such as the Brazilian real, South Korean won and Thai baht — all countries that have struggled to weaken their currency against the dollar this year in order to keep their exports cheap and their economies in recovery.

The decline was “further confirmation that the overall, dominating theme in the market is still that of adding to risk rather than a cautious approach,” said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. Every dip back in stocks and corresponding rise in the dollar since the rally began in spring has been a “fairly brief and shallow correction, until investors jump back on the buying-risky-asset bandwagon. Thats what we’ve seen playing out today once again.”

One factor prompting more aggressive buying Friday was the official end to the recession in the eurozone, Strauss said. The EU statistics office said the eurozone economy grew 0.4 percent in the third quarter.

Also on Friday, the U.S. government said the trade deficit widened to $36.5 billion in September, up 18.2 percent from August. Even though American exports rose because of a lower dollar, the surging price of imported oil more than offset the fifth-straight monthly gain in exports.

The trade deficit with China deepened as well. On Thursday, a quarterly report from China’s central bank signaled that Beijing may let the yuan resume its appreciation, which was paused last summer as global trade collapsed.

U.S. manufacturers argue that the yuan, which Beijing has effectively pegged to the dollar, is undervalued by up to 40 percent. This makes Chinese goods cheaper for consumers and businesses, but it makes American products more expensive for China’s huge market.

In other late trading, the dollar dropped to 1.0135 Swiss francs from 1.0162 francs late Thursday, and fell to 1.0517 Canadian dollars from 1.0546.