(Bloomberg) -- The dollar will extend its drop versus the euro over the next two to five years, falling as much as 20 percent to an all-time low under a widening U.S. budget deficit, Harvard University's Professor Niall Ferguson said.Policy makers favor the dollar's slide as a means of supporting a recovery from the worst economic slump since the Great Depression even as they voice support for a strong greenback, Ferguson said in an interview on Bloomberg Radio.
A weak dollar is "the simplest solution to most of America's problems right now," said Ferguson, author of "The Ascent of Money: A Financial History of the World." "We are likely to see 1 percent to 2 percent growth unless exports take off, and that's what everyone in Washington is quietly hoping: If the dollar keeps sliding, then maybe we can get some traction on exports."
The dollar increased 0.4 percent to $1.4888 versus the euro today after depreciating yesterday to $1.4968, the weakest level in 14 months. The U.S. currency touched $1.6038 on July 15, 2008, the weakest level since the euro's 1999 debut.
The world's largest economy shrank at a 0.7 percent annual rate in the second quarter, the Commerce Department reported last month. Gross domestic product contracted at a 6.4 percent pace in the first three months of 2009.
Economists forecast the current-account deficit will rise to 3.2 percent of gross domestic product in 2010 and 3.3 percent in 2011, compared with 2.9 percent this year.