Dollar falls to a multi week low as deficits again haunt the market

The dollar fell to its multi weeks low after data on Friday showed that the trade deficit widened to its second highest level of $58.3b in January against an expected figure of $56.5b.
This led the market to focus yet again on the twin deficits of the US and punished the dollar for the same. With soaring oil prices- touching $55 per barrel, rising bond yields and this week’s slew of important data releases (January TICS capital flows, current account deficit, retail figures, industrial production and ZEW numbers from Germany) it appears that there seems to be further fall in store for the reserve currency.
Across the Pacific a revision in the Japanese GDP figures to 0.1 percent from an expected fall of 0.2 percent for the last quarter of 2004 boosted the yen against the greenback. But hopes that BoJ would maintain its surplus liquidity in the markets has led the traders to be cautious in selling the dollars beyond mid 103 levels.
The hawkish comments from the ECB members, due to surplus liquidity, also looks to support the single currency.