When the U.S. trade deficit narrowed dramatically in July, optimists were sure that its improvement would go on gathering momentum, but pessimists warned, “Wait a while.” Last week the August figures were released, and the pessimists were proved right. The gap between imports and exports widened to $12.2 billion, up from July’s $9.5 billion. While the deficit has been shrinking this year — to an estimated total of $140 billion, compared with $170 billion in 1987 — progress may be slowing. That prospect has aborted the U.S. dollar’s summer rally. The currency fell last week to 128.25 yen, capping a decline of 4% since August. The plunging dollar reflected the belief among traders that a weaker currency will be necessary to wean U.S. consumers from foreign imports.
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