The dollar fell sharply ? and gold rose ? as a surprise deterioration in the
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US
trade balance undermined a key prop for the
US
currency and economic growth.
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The figures, which showed the trade deficit widening to $57.2bn in October in spite of lower fuel prices, came as analysts sharply increased their estimate of the pace of economic contraction in the
US
this quarter. Macroeconomic Advisers, a consultancy, estimated that the
US
was on track for an annualised decline of 6.6 per cent.
Fresh data on unemployment claims also suggested that there was no respite in the rapidly deteriorating jobs market. Meanwhile, a Federal Reserve survey showed US household net worth decreased 4.7 per cent in the third quarter, the fourth consecutive quarterly decline. US mortgage borrowing fell at the fastest pace on record.
Just after midday in
New York
, the dollar was down 2.1 per cent on an index basis, while the euro was up 2.4 per cent against the
US
currency.
Sterling
also fell, hitting a fresh all-time low against the euro of 89p as traders appeared to shy away from the two big economies most obviously exposed to falling house prices and financial sector woes.
“The notion of broadening dollar weakness is explicitly reflec-ted in gold's rally past the $825 mark, which is the first five-day winning streak since September,” said Ashraf Laidi, chief market strategist at CMC Markets.
Until recently the dollar had benefited from the increasingly global spread of the credit crunch since September, with soaring demand for dollars outside the
US
and a flight to US Treasuries, commonly seen as the safest and most liquid securities.
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