The US dollar suffered a severe sell-off on Friday, taking it to its weakest level against a trade-weighted basket of currencies since October 1997, as fears about the US current account deficit crossed world markets.

Worries about US inflation, which have intensified since this week’s meeting of the US Federal Reserve’s rate-setting open market committee on Wednesday, sparked further sharp losses for US stock markets. The Nasdaq Composite fell a further 1 per cent in morning trading after its 2 per cent fall on Thursday.

US government bonds also suffered, bringing the yield on the benchmark 10-year bond to its highest level in four years.

The dollar has lost 7 per cent against the euro, yen and sterling since the beginning of April, a slide that will in turn intensify worries about inflation in the domestic economy.
news.ft.com

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