Export jobs warning over sliding dollar

FURTHER record lows were reached by the dollar yesterday as the once mighty greenback fell to $1.3383 to the euro.

It continued to slide as fears over the trade and budget deficits continued to undermine the currency.

The Bank of England warned the dollar could fall to $1.35 to the euro before Christmas on the back of concerns over the national finances of the greatest economy in the world.

The other factor is that the US has indicated clearly it wants the dollar to find its own level.

The Irish Exporters Association warned yesterday 15,000 jobs will be lost unless the dollar’s slide is halted. Exports worth €1.5 billion risk being lost over a 12-month period.

Dollar weakness grew across markets yesterday as intervention by the Bank of Japan failed to materialise. This reinforced the view a weaker dollar has global market support.

Niall Dunne of Ulster Bank markets says the dollar slide is a fixture for some time to come.

How far it goes is hard to tell, but he is not dismissive of a euro worth $1.40 to $1.45 in the months ahead.

If you start history at 1984, the euro, if projected back to that date, was worth 73 cent on November 28.

By 1994 it had risen to $1.22 on November 28 and yesterday, it climbed to a new high of $1.3383.

For those who want a 20-year perspective in Ir£ terms, Mr Dunne notes that over 20 years the pound’s traded average to the dollar was $1.42. For much of that period the pound has traded above that figure, showing clearly the dollar has not always been as dominant as some might believe.

In the 1960s, an Irish pound would buy you $2, so the Irish experience of the two currencies has been of a strengthening of the greenback.

The link with sterling was also a factor until we broke the sterling link in 1979.

Since the inauguration of the euro in 1999 when it opened at $1.17, the euro fell out of favour up until November 2000 when its value dipped to about 82 cent, its lowest ever trough.

The strong euro lowers inflation because it makes imported goods cheaper.

With oil denominated in dollars, the impact of oil hikes has been significantly less than otherwise would be the case.