By John S. McClenahen With the U.S. federal budget and current account headed into deep deficits, there are fears that interest rates will soar or that manufacturers and other business will be "crowded out" of the money markets. Either could happen. (And presumably the recovery from the 2001 recession would suffer). But Merrill Lynch & Co., New York, foresees another scenario. The securities firm says the U.S. dollar will bear most of the brunt of the deficits. "We believe that most of the negative impact [of the] rising twin deficits will come via a lower dollar, not dramatically higher interest rates," states senior economist Kathleen Bostjancic. Merrill's analysis assumes that the U.S. economy will struggle to reach a 3.5% growth rate in 2004, investment demand rises only modestly, the Fed does not raise interest rates in 2004, and private saving increases.