Euro hits $1.24. US investors betting against dollar.
Posted on Wed, Dec. 17, 2003
Dollar Hits New Low As Euro Surges
ANUSHA SHRIVASTAVA
Associated Press
NEW YORK - The dollar sank to a new low against the euro Wednesday as the euro extended a rally that has seen it rise nearly 18 percent against the U.S. currency this year.
The euro surged to an all-time high of $1.2422 and held most of the gain, settling at $1.2404 in late New York trading and topping the previous high hit Tuesday when the euro reached $1.2361.
The dollar has fallen new lows against the euro nearly every day for the last two weeks and has remained near three-year lows against the Japanese yen. On Wednesday, the dollar hit an 11-year low versus the British pound.
In late trading in New York, the British pound rose to $1.7677 from $1.7556 late Tuesday. The dollar was quoted at 1.2802 Swiss francs, up from 1.2587, at 107.36 yen, down from 107.43 yen and 1.3263 Canadian dollars, up from 1.3234.
"The market mood is against the dollar," said Commerzbank economist Christoph Balz in Frankfurt. "Short-term, there's no end in sight."
After sending the euro as low as 86 cents in February 2002, the dollar is now 44 percent below the $1.18 exchange set when the euro debuted on Jan. 1, 1999.
The dollar's steady slide has been driven by persistent concerns about the U.S. budget and trade deficits, which economists say can undermine a country's currency in the long term.
Currency traders also have also been emboldened by statements from the European Central Bank indicating that it does not view the euro's relentless rise as a threat to the continent's economic recovery, even though it tends to make European goods more expensive for foreigners to buy.
And economists say the ECB appears to have started thinking about when to increase interest rates already a full point higher than the key U.S. rate.
Higher interest rates in Europe tend to make the continent a more attractive place to invest than the United States, driving up demand for euros - and down for dollars.
Despite the strong performance of U.S. equity markets, foreign investors are not participating in it like they were in the 1990s, said John Rothfield, senior currency strategist at the Bank of America.
"Foreigners are either leery of buying dollars or if they buy, it is on a currency hedge basis," he said.
And U.S. investors are sending more money abroad, he added.
"U.S. investors have started buying foreign stocks and bonds which causes a further decline in the dollar," he said. "The main point right now is that regardless of the state of the U.S. economy, we continue to experience a decline in the dollar, but it is a remarkably smooth descent."
Michael Rosenberg, head of foreign exchange strategy at Deutsche Bank, predicted the dollar will go down to the $1.40-$1.50 range against the euro in the next two to three years unless the U.S. trade deficit is reined in.
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Associated Press Writer Tony Czuczka in Berlin contributed to this report. |
