Posted on 12/17/2003 2:12:50 AM PST by SUSSA
FRANKFURT, Germany - Europe's common currency rode to a new all-time high against the U.S. dollar Tuesday, amid persisting worries about the overall health of the U.S. economy.
The 12-nation currency rose early in the day at $1.2361 beating a new record of $1.2355 set in thin afternoon trading in Asia. It later dropped to $1.2339 in afternoon trading here.
Over the past several months, the euro's surge has pushed it more than 17 percent higher against the U.S. currency, amid stubborn concerns over the U.S. budget and trade deficits, which economists say can undermine a country's currency in the long term.
Currency analyst Jane Foley with Barclay's Capital in London said dollar-negative sentiment is driving the euro up, "not any particularly euro factors."
Just how little the dollar rallied on news of Saturday's capture of former Iraqi leader Saddam Hussein (news - web sites) "just goes to show that it's very, very difficult for the dollar to find anything that will support it," Foley said.
Concerns that the U.S. trade deficit will continue to grow as the American economy brightens will keep the dollar high well into next year, Foley predicted.
"For now it seems very unlikely that we are going to see any near-term reversal," she said.
But Dorothea Huttanus, an analyst at Dresdner Bank in Frankfurt, sees the euro's climb as a self-perpetuating upward spiral sustained by thin year-end trading that she predicts will not last into 2004.
"The dollar is actually a much more solid currency than the euro could ever be," Huttanus said.
She noted that despite the U.S. deficit, enough positive signals are coming out of the United States to drive the euro back down next year.
Earlier this month, the European Central Bank dismissed concern about the surging euro, which it oversees, and president Jean-Claude Trichet refused to be drawn on whether there was a threshold that the bank would consider too high.
Some analysts have said the bank might intervene if the euro continues a rapid climb to slow the currency's rise to a more orderly pace.
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