TOKYO, Dec 16 - The dollar hit a record low versus the euro on Tuesday as euphoria over the weekend capture of former Iraqi leader Saddam Hussein quickly gave way to old fears about the U.S. current account deficit. "We had the best dollar-buying factor we could think of but the dollar failed to rise," said Kota Kimura, assistant manager at Shinkin Central Bank. "Basically, funds are not going back to the U.S." The euro rose as high as $1.2355 , a gain of 0.3 percent on the day. As of 0545 GMT, it was at $1.2335 versus $1.2310 in late U.S. trade. "It's clear Saddam was not running insurgent attacks in Iraq and that his arrest does not mean the end of violence in the Middle East," said Takashi Toyahara, forex manager at Nomura Securities. "There are many reasons to sell the dollar. Some people say it's lingering geopolitical risk. Others say it's the U.S. twin (fiscal and current account) deficits," Toyahara added.
The euro also rose to 132.95 yen , up about 0.4 percent from 132.48 in late U.S. trading. The dollar managed to show a small gain against the yen on concerns that the Japanese authorities would step in to stop the U.S. currency's descent. The greenback was trading around 107.80 yen , up about 0.2 percent from late New York levels.
DEFICIT WEIGHS
With the capture of Saddam failing to provide much impetus for the dollar, traders were concentrating on the old theme of structural problems in the U.S. economy, particularly the current account deficit, with third quarter figures due at 1330 GMT. A poll of Wall Street analysts and investment banks came up with a median forecast of a deficit of $136.10 billion, slightly below $138.67 billion in the previous quarter. "Basically the U.S. needs about $45 billion a month from abroad to make ends meet. But clearly it is not receiving that much," said Shinkin's Kimura. International capital data from the U.S. Treasury show foreign investors bought a net $27.65 billion of U.S. financial securities in October. Tuesday will also see U.S. consumer prices and housing starts for November, both due at 1330 GMT. Traders said the market would receive the news in the same way it had responded to other recent U.S. economic data. "If the data is good, the market won't react. If it's bad, then we'll see a sell-off (in the dollar)," said Toshihiro Azuma, a manager at Sumitomo Trust and Banking. "At the moment everyone's just looking for reasons to sell the dollar, so even if the figures are good, few are going to react."//