The dollar slipped early this morning as the market reacted to warnings from US Federal Reserve chairman Ben Bernanke about the growing budget deficit.

This morning the dollar stood at 1.7429 against the pound and was at 1.2022 to the euro.

Mr Benanke's comments came in a letter to Senator Robert Menendez earlier this month, which, it emerged, underlined concerns about the ability to carry the burden of the deficit.

Within the context of an ageing population, Mr Bernanke said care needed to be taken.

"I think it would be very desirable to take concrete steps to lower the prospective path of the deficit," he commented.

All eyes will now turn to the interest rate and whether Mr Bernanke will seek to manage the deficit through adjustment.

The last 14 meetings of the Fed have seen it raise interest rates.