Euro Hits 2-Year High Against Dollar; Euro now at .9654 cents

Various sources | 20 June 2002

[July 4th]

US Dollar is currently dropping on news of our trade deficit and a declining interest in American stocks.

The euro currently stands at .9654 cents, and the pound at $1.50.

Click here for current information: Oanda.com

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Here is a story from the AP:

Euro Hits 2-Year High Against Dollar
Thu Jun 20,12:52 PM ET
By DAVID McHUGH, AP Business Writer


FRANKFURT, Germany (AP) - The euro rose to its highest level against the dollar in more than two years Thursday, climbing above 96 U.S. cents as traders dumped the greenback over fears about the growing U.S. trade deficit and wobbly stock market.

The currency reached 96.45 cents in afternoon European trading, its highest since March 2000, when it traded at 96.53 cents.

New figures that showed the U.S. trade deficit at a record dlrs 35.9 billion in April helped push the euro up from levels just below 95.60 cents early in the day.

"That was the spike that took it over 96," said Nigel Anderson, a currency strategist at RBS Financial Markets in London.

The rally was motivated more by doubts about the dollar than conviction about the strength of the euro and the economies of the 12 countries that use it, he said.

Anderson said the current euro rally looked more solid than earlier ones, in which the currency moved toward parity — one euro to the dollar — only to fizzle out.

"The longer it continues, the more comfortable people are moving their assets into euros and that reinforces the upward trend," he said.

Trade deficits mean more dollars must be sold to get the foreign currency to pay for imports, driving down the dollar's exchange rate. Until recently, that was offset by foreigners needing dollars to invest in U.S. financial markets — support that has waned as stocks have fallen.

A stronger euro makes European vacations more expensive for Americans, but makes it easier for U.S. exporters to compete in Europe. The euro's rise has also lessened inflationary pressures in Europe, giving the European Central Bank more time to wait before raising interest rates.

The euro hit its all-time high of $1.18 shortly after its introduction in January 1999. Notes and coins were introduced in 12 European Union ( news - web sites) countries on Jan. 1.

[July 4th]

For those planning European vacations this summer, I hope you've purchased your euros by now.

[habs4ever]

Moving 9% since April is hardly crashing.And the idea that its bad for the deficit.Please!! It's rising, ergo a J-Curve effect is still in place.Separate the stock vs flow-of-funds affect when making this type of analysis.The idea that fereners will stop buying is nonsense.All that happens is that the asset values get REPRICED, hence a stock effect.

[M. Thatcher]

A) Euro hit all-time high of $1.18 in January 1999

B) Euro currently stands at .9654 cents

C) therefore it is the Euro that is "crashing," not the dollar.

D) DUH.

[KantianBurke]

I have only one question......

How does this effect that lockbox that Gore was talking about?

[steve50]

Febuary gold futures took an interesting bump today. Somebody doesn't like the look of next year.

[July 4th]

True, but the nearly 2% of the 9% was in the last day or so. That's a lot when dealing in currencies which sometimes move only hundredths of a point in a week.

But I will concede that "crashing" depends on your outlook. It certainly has more political than economic implications at this point. A euro that can break the $1 barrier will be seen as a victory for the Eurocrats' creation, and will once again renew the debate on the viability of the euro as a reserve or peg currency.

[AmusedBystander]

Good news for exporters.

[DoughtyOne]

Yes I believe you make a very good point $1.18 vs $0.96. I am concerned about this trade deficit though. I know I'm in the minority around here, but $420 billion a year? That is massive, and it's only going to get bigger.

[July 4th]

therefore it is the Euro that is "crashing," not the dollar.

Well, it all depends on how far you want to go back. The euro took a huge initial spill, and it has sat at the 90 cent level for over a year. The gains it has made recently, and especially over the last 24 hours indicate things may be changing long-term. (And there's also the opinion that the $1.18 opening was simply European central bankers dream in the first place.)

[glaseatr]

but makes it easier for U.S. exporters to compete in Europe

I did'nt know we exported anything any more..I know we import everthing from shoes to immagrants, legal and otherwise. /sarcasm

[cynicom]

The "fears" that money people experience every other day, seem to sap their good sense. Let them rush all their money into the Euro or wherever. At the next bad world event they will all run pell mell with Euros in hand seeking safety, not outrageous profit, vultures they are.

[habs4ever]

World trade is priced in US funds, and the US has a global share of world output at about 36%.It has nothing to fret about regarding Europe.This is just a dumb reporter trying to make sense out of currency market gyrations.Why doesn't the guy throw in a chart of the USD vs the Morgan Trade Weighted Index going back to 1996 for a little prspective??

[ex-snook]

========= "WASHINGTON — The U.S. trade deficit in goods and services widened to a record $35.9 billion in April, as improved U.S. economic growth boosted demand for imported goods, the U.S. government said on Thursday. "

Gee, I wonder how much more "improved U.S. economic growth" we can stand as we fast-track to still more trade deficits and tanking stock market.

[habs4ever]

Do yourself a favour and get some LT charts on the currencies going back to the '70's and look at the swings, and then tell me what disasterous implications they had? Hell, even try going back to 1990 and looking at the US from '90-95....and its rally from '95 to '02....

[July 4th]

Good news for exporters.

Absolutely. But it's too bad that we've been importing things like crazy over the last decade.

[habs4ever]

Since when is a trade deficit bad for growth? will you please prove that statement?

[katana]

"Crashing" ? You're either kidding or you have no clue what you're talking about. The Euro started out life at a value of $ 1.05, so it still has to gain around ten percent in value to get back to where it started.

Besides, a strong dollar is not an unqualified positive. It may be good for (American) tourists and the rate of inflation, but it also directly affects exports (read: jobs).

Over the past twenty years the Dollar exchange rate with the major currencies of that period (Yen, D-Mark, etc.) has fluctuated wildly. In the mid '80s a Dollar would buy 3 D-Marks. Two years ago it would buy half that. Finally, when the Mark ceased to exist at the beginning of this year it had regained much of its old strength and exchanged for around DM 2.25. A loss of ten or even twenty percent of its value against the Euro and Yen is neither unusual nor an entirely bad thing.

[habs4ever]

Gee, you have something against running a capital account surplus? You know, importing capital? Lowering the risk premium on US Treasuries and the cost of capital to homegrown investors?

Think about that next time.

[Jhoffa_]

I have a question..

Can some walter williams type tell me what detrimental effects can be expected to surface when a bunch of different countries all key themselves to a common currency?

For example, what if my country get's greedy and mints more than they are supposed to?

I am sure this is a bad idea.. I am just not sure why.