The US dollar has continued to slide against the yen and euro amid speculation that the White House wants a weaker currency to boost exports.
A report in Monday's Wall Street Journal claimed that President George W Bush's administration is "quietly acquiescing" to a dollar drop.

Policymakers are signalling they are happy for declines by not aggressively talking up the dollar, analysts said.

It fell to an eight-month low of 109.66 yen, and hit $1.2923 versus the euro.

Trade movement

Th At the same time, China's currency settled below the key 8-yuan level against the dollar for the first time since it was revalued last year.

By setting the yuan's level at 7.9982 versus the US dollar on Monday, China is signalling that it is willing to allow its currency to appreciate further against the US dollar, analysts said.

The strength of the dollar against the yuan has been a key issue facing the White House, especially as Chinese exports to the US have surged.

Earlier this month, the US Treasury criticised China for making "too little progress" in reforming its exchange rate, but stopped short of accusing Beijing of manipulating its currency. That would have paved the way for sanctions.

Figures last week showed that the total US trade deficit for the first three months of 2006 was $196.2bn, putting it on track to beat last year's record of $724bn. The deficit with China grew to $15.6bn in March.

However, it is not all one way traffic and US exports to China hit a record $5bn in March.

The Wall Street Journal said the White House was now hoping to see a boost to US exports, helped by faster global growth and the weaker dollar.

Market concerns

This view was backed up by Japan's Finance Minister Sadakazu Tanigaki who told Jiji Press that US Treasury Secretary John Snow is happy for financial markets to decide the value of currencies.

While a weaker US dollar may be good news for US exports, it is having a knock-on effect in other markets.

Share prices in the US, Europe and Asia have been hit over the past couple of sessions as investors worry about lower earnings at exporters like Sony and Toyota, whose goods could become more expensive in the US.

And a lower dollar could increase US inflation and make it more likely that the US Fed continues to raise interest rates, which are already at 5%, reducing growth propsects in the US.

On Monday, Japan's benchmark Nikkei-225 index fell 1.3%, tracking declines on Wall Street and Europe on Friday.

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