The dollar slipped against a basket of currencies on Thursday as stock markets rallied while the British pound was boosted after the launch of a bank insurance scheme for toxic assets. However, the dollar held its gains against the yen as worries over the health of the Japanese economy sent the yen to a three-month low. U.S. President Barack Obama forecast a $1.75 trillion budget deficit for the world's largest economy, amounting to 12.3 percent of GDP -- a figure that analysts said could prove dollar negative. "In the short term there seems to be some additional concern over the size of the budget at $1.75 billion," said David Page, economist at Investec in London. "The overall outlook for the dollar is to continue to trade along the line of where sentiment goes, rather than these numbers. We don't think the Obama budget is going to have much of an impact on the dollar over the course of the day," Page said. The dollar was down half a percent against a basket of currencies .DXY at 87.426 -- reflecting a slight rise in risk seeking as reflected in stock market gains. World stocks as measured by MSCI's all-country index rose 0.6 percent on the day to 191.47 .MIWD00000PUS, while futures showed U.S. stocks were set for a positive start. The euro was up 0.7 percent at $1.2794 . "Euro/dollar is the best risk-on or risk-off barometer now, and that's a little bit stronger," said Lee Ferridge, an FX strategist at State Street Global Markets.

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