Dollar weakens despite narrowing US deficit

The US Treasury budget for October shows rising revenue helping to reduce the deficit, but the report hasn’t halted today’s decline in the US dollar.

Employment growth helped lift revenue for the US Treasury Department last month, while the effects of sequestration meant spending was kept well reined in.

This meant that the deficit reduced in the first month of the US government’s new fiscal year, shortening to -$91.6 billion versus the -$120 billion seen in October 2012.

Receipts increased by around 8% from the year-ago amount, with outlays declining 4.5%, although the partial government shutdown may have contributed to a temporary reduction here. The $199 billion of revenue is the largest on record for October.

The median forecast of economists polled by Bloomberg was for a deficit of $102 billion.

The budget deficit of $680.3 billion for the fiscal year just gone was a five-year low, the first time the deficit had come in smaller than $1 trillion in those five years, and today’s report shows that the country’s finances continue to show improvement. Last year’s deficit represented 4.1% of US GDP, however, which remains quite high historically. Lawmakers in Washington are yet to agree on spending levels for 2014, with a temporary spending bill in place until 15 January.

By mid-afternoon in New York, EUR/USD was up 0.19%, GBP/USD had risen 0.75% and the dollar index, a measure of the dollar’s strength against a basket of six major currencies, was down 0.32%.

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