NEW YORK (Reuters) - The dollar extended its slide against most currencies on Thursday on concerns over global central bank reserve diversification, a widening U.S. trade deficit and this week's dive in bond prices.
Having slumped to multi-month lows against its major counterparts on Wednesday, the dollar suffered another blow on Thursday after Japanese Prime Minister Junichiro Koizumi told parliament that, generally speaking, diversity in foreign exchange reserves was a good thing.
The Ministry of Finance, which manages the world's largest foreign reserve holding of $840.6 billion, quickly clarified that it has no plans to shift funds out of the dollars.
"Although MoF quickly suggested that they had no plans to change now, the suspicion lingers that more Asian central bank diversifiers are to appear," wrote Goldman Sachs analysts in a research note on Thursday.
But the specter of diversification was raised again, putting pressure on the dollar again, much as had happened after South Korea's central bank mentioned the subject in a report last month.
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