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.
Chart below shows the Euro's history over the long term. You can see it was basically at the same level it is now when it was launched in the late 1990s. Then look at that dip. The Euro hasn't been surging so much as it has been getting back to where it started when it was officially launched.
Certainly no cause for alarm or it should've been very alarming when at the Euro's official launch that the dollar was so weak against it. I don't recall hearing too much about uproar about it back then...
Yep. I live in Europe and although my daily currency is Pounds Sterling I am experiencing a similar effect- the pound is up against the dollar. I am using this as an opportunity to pay off debts owed in US dollars. I wind up paying less than the amount I owed (relatively figured against what I would have originally owed in Pounds). Every up and down turn has its advantages and disadvantages. The trick is capitalizing on them.
I think a lot of emotional baggage is attached to the terms we use to describe currency trading. It's somewhat irrational but it's human too and hence unavoidable. People don't want to be weak. They don't want to be associated with something that is weak. People hear "Weak Dollar" or "Strong Dollar" and this instills a certain amount of emotional weighting even if it can be demonstrated that it has positive or negative aspects either way.
There's another thread somewhere about the Brits seeing this as a big boon time to come to New York and do their Christmas shopping, which is a perfect encapsulated illustration of the positive side of the weak dollar. Right now is not a good time for Americans to buy foreign things but it is a great time for foreigners to buy American. So much so that the British, in this example, see it as very much worth it to fly all the way to NY with empty suitcases (or buy luggage in NY) and stay in a hotel for a week merely to buy presents for their friends and family. I saw a breakdown recently on how much you could save as a Brit and depending upon how much you bought, the savings would actually cover the cost of the trip quite nicely with still substantial savings on gifts you would have purchased anyway.
Right. Mostly, I suspect, because of a political bent. The biggest reason is the U.S. interest rates is at a 45 year low.
When the FED does increase the rate, you'll watch the dollar value go up and up.
The dollar will continue to fall until we get a balance of trade surplus, until we get a federal budget surplus, and until all the jobs and factories come back from asia.
Until then, until that happens, buy gold.
The US economy is NOT!!! strong.
The fact that americans are buying lots of chinese goods means that the economies of red china, india, korea, etc are strong.
It is India and red china where all the new factories, new offices, and all the jobs are. The Asian economy is booming, not the United STates. We may be spending a lot, but that does not make us "strong". Spending and producing are two different things.
A country, or even a family, that produces nothing, has no job, but spends a lot, and increases its debt by a trillion dollars each year, is not healthy nor "strong" financially.
All that aside, I know first hand these sorts of things are small comfort when you're trying to make ends meet, but if all else fails and it's possible, maybe you can just come home.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.