Jan. 31 (Bloomberg) -- Bill Gates and Warren Buffett, the world's two richest men, are partners in business, bridge and travel. Now they've joined in a bet against the U.S. dollar.

Gates, chairman of Microsoft Corp., said he expects the dollar to extend its three-year drop because of widening U.S. trade and budget deficits.

``I'm short the dollar,'' Gates told television interviewer Charlie Rose this weekend at the World Economic Forum in Davos, Switzerland. ``The ol' dollar, it's gonna go down.''

Buffett, whose personal fortune of more than $42.9 billion is topped only by Gates's $46.6 billion, has been buying foreign currencies since 2002, citing the impact of the U.S. deficits. Their concerns were echoed in Davos by policymakers including European Central Bank President Jean-Claude Trichet and investors such as George Soros.

The dollar has fallen 26 percent against a basket of six major currencies since the start of 2002. The trade deficit swelled to a record $609 billion last year, and the Bush administration expects the budget shortfall to reach an all-time high of $427 billion in the year ending in September.

``It is a bit scary,'' Gates said of the U.S.'s $7.62 trillion in debt. ``We're in uncharted territory when the world's reserve currency has so much outstanding debt.''

Diversification

Buffett, chairman of the Omaha, Nebraska-based investment company Berkshire Hathaway Inc., bought $1 billion in foreign- currency contracts in the third quarter, bringing his total to $20 billion of forward contracts in eight currencies on Sept. 30, according to Berkshire. The currency position gave Berkshire a $412 million pretax gain in the quarter as the value of the dollar fell.

``That's a long-term position,'' Buffett, 74, said in an August interview. ``I have no idea what currencies are going to do next week or next month or even next year. I think I know over time.''

Gates, 49, tops Forbes magazine's list of the richest people in 2004, with Buffett second. Almost all of his wealth is in Berkshire stock. Karl Albrecht, an owner of the Aldi supermarkets in Germany and Trader Joe's gourmet-food chains in the U.S., ranks third with $23 billion.

`Change Agent'

Gates's and Buffett's shared view on the dollar is not the billionaires' only joint interest.

Gates revealed a $319 million stake in Berkshire Hathaway on Dec. 21 a week after he joined the company as a director. The two play bridge and have traveled together, taking a 1995 train trip through China.

Buffett made his first investment in China in 2003, buying a stake in PetroChina Co. In Davos, Gates described China as a potential ``change agent'' for the next two decades. ``It's phenomenal,'' Gates said. ``It's a brand new form of capitalism.''

Gates's $27 billion foundation in September received approval from China's foreign-currency regulator to invest as much as $100 million in the nation's yuan shares and bonds.

The comments by Gates about the dollar came a week before Group of Seven officials meet to discuss currency policy and were echoed by officials from Europe and Asia.

Euro Rally

The euro rose as high as $1.3666 on Dec. 30 and bought $1.3038 at the end of last week. A stronger euro reduces the competitiveness of European exports and crimps growth among the nations sharing the currency.

``The governing council of the ECB has repeated a very, very short sentence, namely that the sharp moves upward of the euro were unwelcome and that we thought they were counterproductive from the economic growth perspective,'' European Central Bank President Jean-Claude Trichet said at a Davos panel discussion.

U.S. growth reached a five-year high of 4.4 percent in 2004, outpacing Europe for the 12th time in 13 years. The euro region probably grew 2.1 percent, according to European Commission estimates.

The U.S. budget shortfall is ``the No. 1 risk, disregarding geopolitical risks'' to the global economy, German Deputy Finance Minister Caio Koch-Weser said in a Jan. 27 interview in Davos. He urged Bush to present a ``credible'' plan for getting the deficit under control.

Chinese central bank adviser Yu Yongding said in Davos the U.S. government should do more to tackle its record current- account deficit and ease pressure on China to loosen its currency's peg to the dollar.

``The U.S. should take the lead in putting its own house in order,'' Yu said. ``It's the root cause'' of global imbalances. ``China will make its contribution, but the world should not put disproportionate pressure'' on the country.

To contact the reporter on this story: James Hertling in Davos at jhertling@Bloomberg.net; Simon Clark in London at 2059 or sclark4@bloomberg.net.

Last Updated: January 30, 2005 19:13 EST