Posted on 02/19/2004 9:38:55 PM PST by quidnunc
When the euro was first issued in 1999, members of the euro zone relished the idea that it might make a dent in the U.S. dollar's status as the world's premier reserve currency. Ironically, that may be the last thing the EU wants to see happen today.
Restored pride aside, a wider adoption of the euro as a reserve currency means that dollars would be sold to buy euros. An even stronger euro now would be as welcome as a return of the plague.
Europe is lagging the U.S. in growth at exactly the same time the dollar is falling and the euro is soaring. The euro has risen 44 percent against the dollar since the start of 2002. And during the fourth quarter, the euro region's economic growth slowed because the 12-nation common currency's gains hurt exports.
The euro's gains are being blamed for Europe's torpor. Politically, allowing the euro to continue upward may be damaging to the European Central Bank, and, in a wider context, the EU itself.
This is a prime example of how reversible things can become in the foreign-exchange world. The euro spent the first three years of its life in the foreign-exchange dumper. It was launched at about $1.17. In October 2000, it hit a low of 82.3 U.S. cents.
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Pride in the euro has become fear of its strength, and nobody in Europe quite knows what to do about this situation. Exporters are screaming for the ECB to stop the euro from getting even stronger. The bank, to its credit, is staying on the sidelines, except for giving the currency predictable lip service.
What might happen next is that the Europeans will accuse their politicians of having made a currency that's too strong for Europe's own good. The once-proud architects of the euro created a laboratory monster. They released a Frankenstein currency that they can't control. Now it's on a rampage, devouring Europe's economic growth prospects by drowning export industries.
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(Excerpt) Read more at quote.bloomberg.com ...
Hmmmm. That's where Europeans sent their heritage, it seems, It might just be a good place to excavate. :-)
I got some sitting in my drawer from my travels a while back...
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