(COMTEX) B: Euro Soars to Record High Against Dollar
B: Euro Soars to Record High Against Dollar
FRANKFURT, Germany, May 27, 2003 (AP Online via COMTEX) -- The euro soared to a
record high against the dollar Tuesday in a major boost for many U.S. exporters
but deepening the pain for the continent's struggling economy and American
tourists in Europe.
The euro reached a high of $1.1932 in trading in Europe, breaking the old high
of $1.1884 set Jan. 4, 1999, a few days after the euro began to circulate as the
shared currency of 12 European countries.
Winners include the many U.S. companies that sell overseas, many of which have
reported fatter earnings in recent weeks due to the weaker dollar.
Losers include Europe's export-fueled economy, whose pricing edge over U.S.
competitors is vanishing, and American fanciers of European vacations and
imported goodies like French wine and German sports cars.
They're going to pay more.
"This is a burden," said Michael Rogowski, the head of the Federation of German
Industry. "Every cent above one-to-one gives me bigger stomach pains."
Fewer American tourists have been traveling to Europe anyway, due to concerns
about terrorism and even the SARS outbreak, which is much more acute in Asia but
has influenced perceptions about air travel.
Charles Gildea of Annapolis, Md., ignored these modern-day perils to visit Paris
for his 50th wedding anniversary, declaring: "We weren't going to let anything
get in our way!"
But he admitted the slumping dollar was a hard blow.
"We're suffering - this is costing at least 20 cents more on the dollar," said
Gildea, a retired financial manager visiting Paris' gilded Opera Garnier. "But
then again, Paris means spending money."
A six-euro ticket to savor the stunning antiquities at Berlin's Pergamon Museum
now sets U.S. visitors back just over $7, compared to $5.50 same time last year.
A 180-euro double hotel room in Paris's St. Germain des Pres neighborhood on the
Left Bank has gone from $165 to $212, while the 12-euro admission to Athen's
Acropolis temples has gone from $11 to $14.
Few Americans were among the clutch of Japanese and British tourists admiring
Berlin's Brandenburg gate. "It hurts more every day - obviously a dollar buys
less and less every day," said U.S. tourist Loren Tauer, 52, a university
professor from Ithaca, N.Y.
Faring better are U.S. corporations such as McDonald's Corp., Kellogg Co.,
Procter and Gamble Co., Sara Lee Corp. and Caterpillar Inc., who have repeatedly
cited the stronger euro as boosting their first-quarter earnings. That's because
euros earned abroad now equal more dollars when they come home.
The euro was quoted at $1.1884 in late European trading, up from $1.1857 late
Monday. The dollar edged higher in U.S. markets, where the euro was quoted at
$1.1845 late in New York trading, up from $1.1827 late Friday.
The dollar held steady at 117.26 Japanese yen in late New York trading, but fell
to 1.2849 Swiss francs from 1.2881 late Friday and rose to 1.3749 Canadian
dollars from 1.3746.
Currency markets have become convinced that the U.S. administration likes the
weaker dollar, based on remarks by Treasury Secretary John Snow, including his
statement two weeks ago that the dollar's slide was "fairly modest." That
started a relentless dollar selloff that accelerated a more gradual fall over
the past 16 months.
Reasons behind the dollar's slide include foreign investor's disenchantment with
U.S. stocks and economic prospects. They must sell dollars to move out of U.S.
assets, and that drives down the exchange rate. Meanwhile, higher interest rates
in Europe have drawn investors into euros.
Like their U.S. counterparts, European officials have been relaxed in their
public statements about their rising currency, despite warnings by economists
that their exporters - looked to as leaders of any economic recovery - are in
danger as their goods become more expensive compared to U.S. competitors.
Policymakers have said the euro, now up 38 percent against the dollar since
February 2002, is basically where it was supposed to be when it was launched in
January 1999 at around $1.18. In fact, several of the European currencies that
were replaced by the euro were even stronger against the dollar in the
mid-1990s.
Lucas Papademos, vice president of the European Central Bank, the custodian of
the euro, said Monday that the strong currency "does reflect better the economic
fundamentals of the euro area and is close to historic averages over the past 15
years."
Many economists and business leaders, however, say that a stronger euro
threatens growth, which was zero in the first quarter in the euro countries and
shrank by 0.2 percent in Germany, the continent's largest economy. Some fear
debilitating deflation, a spiral of falling prices and output.
"I think that it is almost an inevitability that they will have to become more
concerned, particularly if the current pace continues," said Jane Foley,
currency strategist at Barclays Capital in London. "In two or three months, they
will have to take on board the fact that deflation is becoming a threat in
Germany, and that recession is already a threat in Germany."
Many think the euro will push the European Central Bank to cut interest rates to
stimulate the economy at its June 5 meeting.
By DAVID McHUGH
AP Business Writer
Copyright 2003 Associated Press, All rights reserved
-0-
APO Priority=u
APO Category=1310
(PROFILE
(CO:Kellogg Co; TS:K; IG:FOD;)
(CO:Sara Lee Corp; TS:SLE; IG:FOD;)
(CO:Caterpillar Inc; TS:CAT; IG:MAC;)
(COUNTRY:Canada; ISOCOUNTRY3:CAN; UNTOP:021; APGROUP:NorthAmerica;)
(COUNTRY:Germany; ISOCOUNTRY3:DEU; UNTOP:150; UN2ND:155; APGROUP:Europe;)
(COUNTRY:Japan; ISOCOUNTRY3:JPN; UNTOP:142; UN2ND:030; APGROUP:Asia;)
(COUNTRY:Switzerland; ISOCOUNTRY3:CHE; UNTOP:150; UN2ND:155; APGROUP:Europe;)
(COUNTRY:United Kingdom; ISOCOUNTRY3:GBR; UNTOP:150; UN2ND:154; APGROUP:Europe;)
(COUNTRY:United States; ISOCOUNTRY3:USA; UNTOP:021; APGROUP:NorthAmerica;)
)
KEYWORD: FRANKFURT, Germany
SUBJECT CODE: 1310
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