Stocks closed lower on Wall Street yesterday after a shortened holiday trading session that was soured by news of the dollar’s woes.

Image Credit... Stephen Hilger/Bloomberg News

“To dismiss this as a technical correction is to overlook the structural reasons why the U.S. dollar is having a very hard time these days,” said Hans Redeker, global head of currency strategy at BNP Paribas in London.

Economists say the United States is in a vulnerable position compared with its global competitors. While the most recent data show that the trade imbalance tightened in September, the decline was largely a result of falling oil prices. The deficit between what Americans import and export was a negative $586.2 billion for the first nine months of the year, and it remains on track to break last year’s record of a negative $716.7 billion. The biggest chunk by far represents imports from China.

The trade gap will be one of the major issues that Treasury Secretary Henry M. Paulson Jr. and other top Bush administration officials discuss next month when they travel to China. Mr. Paulson, along with a delegation that will include Ben S. Bernanke, the Federal Reserve chairman, is expected to press Chinese officials on a number of economic issues, from cracking down on piracy to allowing the Chinese yuan to trade more freely in currency markets.

Analysts said that the dollar’s drop yesterday, which was accelerated by orders from traders to sell automatically once it fell past $1.30 against the euro, reflected a growing anxiety over Chinese economic policy. China’s central bank holds a large amount of American currency, and speculation has intensified recently that it could begin selling off dollars to avoid being burned if the dollar collapses.