Dollar hits all-time low against euro
Friday, November 5th 2004, 11:16 am
By: News On 6
BERLIN (AP) _ The U.S. dollar hit an all-time low against the euro Friday, falling on worries about oil prices and concern over the U.S. budget deficit despite positive U.S. employment data.
The dollar had rallied a bit earlier in the day, with the euro briefly dropping below $1.28 after the U.S. Labor Department reported that employers aggressively hired new workers in October, adding 337,000 people to their payrolls.
But the U.S. currency resumed its downward trend, and later in the day the euro reached a new high of $1.2950. It had reached its previous peak of $1.2927 in February.
Oil prices, which remain relatively high despite a more than 10 percent pullback in recent days, have raised doubts about the strength of the U.S. economy, adding new concerns on top of high U.S. trade and budget deficits, factors that have weighed on the dollar for months.
Economists say sentiment has turned so strongly against the dollar that positive news about the U.S. economy has little impact on its slide.
Dorothea Huttanus, an economist at DZ Bank in Frankfurt cited ``global skepticism about the U.S. economy because of oil prices'' and persistent concern over the U.S. deficits. She noted that although the labor market figures were ``outstanding,'' they only boosted the dollar for about an hour.
Commerzbank analyst Christoph Balz said he expected to see the euro rise as high as $1.31 but to settle lower in the long term.
``The U.S. economy is stronger than people think, which will lead to higher interest rates and make the dollar more attractive,'' he said.
The stronger euro makes European exporters' goods more expensive compared to those of U.S. competitors, and has raised fears that it will dampen Europe's moderate economic recovery.
French President Jacques Chirac said Friday he was ``a little bit worried about the weakness of the dollar'' and how it could affect European exports and the economy. He hinted that the European Union should take action.
``This should provoke certain reactions on our part,'' Chirac added. He declined to elaborate.
However, Chancellor Gerhard Schroeder of Germany _ whose economic recovery has been fueled by strong export growth _ played down concerns over the currency's strength. Schroeder told reporters at an EU summit in Brussels, Belgium, that he sees no reason for ``serious concern,'' adding that the exchange rate ``is not yet dramatic.''
The ECB has kept euro-zone interest rates unchanged for 16 consecutive months at 2 percent. Most analysts still bet the bank will not raise interest rates for several quarters.
After the ECB held rates steady at its meeting Thursday, bank president Jean-Claude Trichet declined to comment on the euro exchange rate, other than to warn that the bank didn't like sudden moves. ``Excessive volatility and disorderly movements in exchange rates are undesirable for economic growth,'' he said.