The dollar moved lower on concerns over this afternoon's quarterly refunding in the US. In particular, the market will be keeping a close eye on the bidding for the three-year 21 bln usd Treasury auction, that may well decide the dollar's near term trend against the single currency. "Expectations in the bond market have been high, thus any disappointment over the auction (particularly with the level of foreign participation) could put the dollar under renewed pressure," said Ian Stannard, currency strategist at BNP Paribas. So far, the US has been able to fund its yawning trade and fiscal deficits by continued support for a range of US financial assets, particularly US fixed income issues. Michael Klawitter, currency strategist at WestLB, also noted that yesterday's presentation of the US budget illustrates the longer-term downside dollar risks as the government is taking "no action to curb the budget deficit". In its presentation, the White House said it expects another budget deficit this year of 423 bln sud. Analysts noted that there is little on the data front ahead of the refunding at 1.00 pm to prompt any marked change in the major currency pairs, though BNP Paribas' Stannard said this morning's German industrial production data for December has the potential to extend the euro's decline down towards 1.1930 usd. "Although a euro break below 1.1930 usd would open near-term downside potential towards the 1.1890 usd level, dollar gains may prove to be short-lived, given the growing risks associated with the refunding," said Stannard. The dollar has garnered some support in recent days as the market continues to price in further US interest rate hikes in the months to come following last Friday's solid US jobs report for January. The market read the data as suggesting that the US labour market is strong enough to warrant at least one more Fed rate hike, in contrast to expectations last month that the central bank was about to end its policy of raising rates just as new chairman Ben Bernanke takes the helm. Over the bulk of the last few months, the euro had rallied against the dollar on a growing market view that the yield-supporting factors that helped the US currency rally in 2005 may have run their course, with the European Central Bank poised for another hike and the Fed seemingly about to pause. The ECB's president Jean-Claude Trichet all but confirmed again yesterday that the bank will raise rates another quarter point in March. The ECB raised its key refi rate in December to 2.25 pct, its first hike in over five years. Elsewhere, the pound was solid even though the British Retail Consortium's monthly survey, published overnight, showed high street spending slowing down dramatically in January following December's pre-Christmas surge. The BRC said like-for-like sales, which strip out the impact of new and closed space, increased by only 0.2 pct from January 2005 against expectations of a 1.5 pct improvement. January's modest increase represents a sharp slowdown from the equivalent 2.6 pct rise recorded in December, and equates to the weakest start to the year since the survey began in 1995. Steve Pearson, currency strategist at HBOS, said much of the weakness was due to a negative base effect caused by the very strong report in January 2005. In addition, he said the heavy discounting reported by the BRC means that the volume of sales will be strong relative to the reported value. "Hence the report is not as weak as it first appears on a headline basis," he said