Weak US dollar to hurt tourism sector

THE record high the euro reached yesterday against the US dollar will cause problems for the Irish tourism, IT, food and export industries, but will increase the repatriated profits of US subsidiaries.

The euro rose to an all-time high against the dollar yesterday amid fears of trade wars and reluctance by foreigners to finance the US trade deficit.

The US has imposed tariffs on Chinese bras, knitwear and other textiles, while maintaining steel tariffs the World Trade Organisation has declared illegal.

At its highest point on Wednesday, 1 bought $1.1978, but the dollar rallied later in the day.

This was just short of the psychological and technical $1.20 barrier.

If the barrier is breached, it could presage a historic realignment of the fledgling old and the new world currencies, and a long-term significant fall in the value of the dollar against the euro.

IIB Bank chief economist Austin Hughes said last night that the Irish economy will be able to weather the storm of a stronger dollar if the US currency does not go into free-fall.

He said an orderly re-valuing of the dollar was required, but said there could also be benefits for the Irish economy.

"The ECB (European Central Bank) might be slower to increase rates until well into next year, and there could even be a rate cut, which will bring significant benefits to certain sections of the Irish economy," he said.

Mr Hughes said the increase in the value of the euro over the dollar was a cloud over the Irish economy, but stressed that an orderly fall of the dollar was manageable and would be of benefit to the global economy in the long term.

The dollar's fall against most leading currencies including sterling started when data showed a huge slump in foreign money coming into the US.

Currency traders were also shaken by the arrest of 48 Wall Street brokers in connection with an alleged securities and currencies fraud.