Euro sets new dollar record

THERE was no let-up for exporters to the US yesterday as the euro reached a new lifetime high against the dollar.

Afternoon trading saw the euro rise to $1.2150 as it broke records for a fourth consecutive day.

Analysts predicted the dollar could fall to levels as low as $1.25 or $1.30, which Friends First economist Jim Power said had the potential to “decimate” European economies.

The dollar’s continued weakness means that European exports to the US are more expensive in dollar terms, while imports from America into the eurozone are cheaper, reducing demand for European-produced goods. Ulster Bank economist Niall Dunne said European authorities would take comfort from the strong euro keeping eurozone inflation down as domestic producers struggled with less pricing power.

Mr Dunne said today could see further volatility on the currency markets as the market waited for news on US employment statistics. Analysts expect positive job news, with a possible boost to the dollar if there are further signs of economic recovery.

Mr Dunne also said the continuing strength of the dollar was a reflection on negative market sentiment towards the dollar, rather than a vote of confidence in the euro.

“The market is obsessed with the dollar at present,” he said. He added that, while the dollar was at record lows since the euro was introduced, it had traded at levels of $1.40 and higher against the euro’s predecessor, the ECU currency unit. The ECU was traded on the currency markets prior to the euro’s launch in 1999.

Some market analysts expressed surprise at the euro’s continued strength after last week’s controversy surrounding the Stability and Growth Pact, which some observers expected would undermine the euro.

The US’s continuing trade deficit, coupled with conflicting signs from the Bush administration concerning the possible introduction of protectionist measures, such as tariffs on imports, are believed to be the main factors weighing on the dollar at present.