Dollar Continues Downward Path As Debt Worries Rise

from Reuters:
The dollar on Thursday plunged to its lowest level this year against major currencies, and the euro approached a five-month high above $1.39 as worries about swelling U.S. deficits soured investors on U.S. assets.

Standard & Poor's announcement that it could downgrade Britain's triple-A credit rating initially weighed on sterling. But Pacific Investment Management Co's Bill Gross said fear the United States may face the same predicament slammed the dollar and drove the 10-year Treasury yield near a two-week high.

"No one wants to admit it but there might be investors nervous enough with the extreme levels of indebtedness of the U.S. government so that just the thought of a downgrade would provide an excuse to sell dollars," said Matt Esteve, a trader at Tempus Consulting in Washington. "If such a thing happened, the impact would be huge."

The U.S. Treasury on Thursday said it would sell another $101 billion in notes next week. [ID:nN21559422]

The euro was up 1 percent at $1.3899 . Earlier, it hit $1.3923, its highest level since early January. The dollar was down 0.6 percent at 94.25 yen, near a two-month low beneath 94 yen . An index gauging the dollar's strength against a basket of six major currencies hit its lowest level this year. .DXY

S&P's warning on the UK initially lifted the dollar by some 3 cents against sterling, but the pound recovered and hit a 6-1/2-month high near $1.59 before easing back to $1.5861 , up 0.8 percent from late Wednesday.