Weak dollar prompts concern

US recovery concerns will see the euro continue to gain ground against the US dollar, economists say.

And it opens up the possibility of a further 0.25% cut in ECB rates in the near future, said Niall Dunne, economist with Ulster Bank Financial Markets.

EU concerns over the impact of the strong euro on trade will force an interest rate cut in order to throw a lifeline to the EU economic zone.

Irish Central bank Governor John Hurley joined the euro debate yesterday when he warned that its further appreciation against the dollar would damage the Irish economy due to its negative impact on export growth.

In late trading yesterday the euro fell to $1.1740, down marginally from the near $1.18 rate it achieved on Monday.

European Central Bank council member Ernst Welteke said he doesn’t see a lasting decline in the dollar, which is down 6% against the euro since August.

Ethan Harris, chief US. economist at Lehman Brothers Inc. in New York, said he may boost his estimate for third-quarter US. economic growth to about 6% from 5%.

“The dollar doesn’t deserve to be as beaten down as much as it has in the past couple of weeks, considering that the US economy is going through a recovery,’ said Nicholas Reitenbach, who helps manage $2 billion of international investments at Pinnacle International Management LLC in New York.

However, views are hardening that , at this stage, the dollar may still weaken to $1.20 per euro by the end of the year, as the US. struggles with a swelling budget deficit and a shortfall in its current account, the broadest measure of trade and investment, said Christopher Low, chief economist at FTN Financial in New York.

Niall Dunne of Ulster Bank is also convinced that the euro has move into a new higher exchange rate to the dollar of $1.15 and beyond.

He expects the current strength of the euro to last indefinitely despite the fact that the US economy is set to lead the global recovery and the European economy will struggle by contrast.