Decline of euro good for exports

THE euro’s continuing decline against the dollar is good for exporters in general, but it is a mixed blessing.

Companies like the Kerry Group, Waterford Wedgwood, CRH, who have strong operations in the United Sates will do well out of the falling euro.

The strong dollar will boost the flagging fortunes of Waterford Wedgwood, which is so reliant on sales in the US for its crystal. It is due to publish results later this week.

However, there is huge downside in terms of the cost of oil and gas. While oil prices have eased in the past two weeks in dollar terms the cost of oil in euros has gone above the €40 mark for the first time.

The price of a barrel of oil in recent weeks has gone from €38.70 to €45, a 16.3% rise.

That is a very serious aspect of the decline in the euro analysts said. They also see little real prospects of oil prices falling significantly over the next few years.

Because oil is priced in dollars the surge in oil prices for the past few years has been offset by the strong euro which traded as high as $1.33 at one point in the cycle.

Already prices at the pumps here have felt the impact and that will get worse if the euro continues to weaken.

Against the dollar, the euro dropped to $1.2063 early yesterday in London, from $1.2120 late on June 10 in New York.

By late afternoon it had fallen further to $1.2039 as optimism about the US economy gave a further fillip to the currency.

John Whelan, chief executive, Irish Exporters Association, welcomed the lower euro saying it was a “welcome development” and would allow exporters to dollar-designated territories to dust down plans put on hold as euro gains forced them out of markets.

Markets outside the US such as Asia where exporters quote in dollars will also offer greater opportunities, if the dollar holds at current levels, he said.

“Ideally we would like to see the exchange rate down at $1.10 which we believe is the fair value and a comfort level for exporters”, he said.