Euro gains again on dollar

THE euro continued to gain ground against the US dollar yesterday, following the announcement last Friday of more job losses in the US.

Having opened at $1.1054 it closed at 1.11 and a minority of economists believe the dollar will continue to lose ground. But even economists who argue the other way have softened their forecasts.

Earlier in the year Bank of Ireland was forecasting the Euro would be worth just $1, only to see it rise to $1.19 as concerns about the US economy grew.

The pro-dollar economists were bullish about the recovery in the world’s largest economy and for that reason they expected the dollar to continue to regain much of the ground it had conceded to the euro since the start of 2003.

Niall Dunne, economist with Ulster Bank Financial Markets, said the latest rally was clear evidence that the euro/dollar relationship remains fraught.

“If the US is to recover, it would seem to need a weaker dollar on which to build that return to growth,” he said. He believed the recovery was beginning and he expected growth in the US to come in at 2% in 2003, with growth of over 3% likely in 2004. But doubts about the economy had persisted and, despite earlier indicators of recovery, last Friday’s jobs figure was another jolt to confidence.

“Only increased demand for US goods and services will solve its persistent unemployment problem and drive this recovery beyond its initial phase. And coming into an election year in 2004, the While House is likely to treat unemployment as a key priority,” he said.

Meanwhile, stock markets overall have maintained a less erratic rise since the uncertainty of the Iraq war ended.

Most made modest gains yesterday with the FTSE up 30 points to 4289.10. The ISEQ was up about 30 points on the day while the FTSE rose by a similar amount.

In the US, the Dow Jones, the Nasdaq and the S&P continued to notch up further modest gains. Since last October the recovery in markets has been very strong. Over the period, the Nasdaq composite index is up 63% from its October 2002 low. The S&P 500 is up 15% and the FTSEs 100 is ahead by 25% as markets believe the worst is over for the global economy.