The Euro's Run May Be Curbed by U.S. Growth Surge:

Bloomberg ^ | 11/12/03 | bloomberg

[Pikamax]

Matthew Lynn is a columnist for Bloomberg News. The opinions expressed are his own.

The Euro's Run May Be Curbed by U.S. Growth Surge: Matthew Lynn Nov. 12 (Bloomberg) -- In Europe, the strong euro has been the key financial trend of this year. Company profitability? Interest rates? Growth rates? They have all been influenced by the unexpected surge in the value of the European currency against the dollar.

[Eric in the Ozarks]

Wonder if George Soros will short the Euro ?

[gridlock]

Why do people have this notion that a higher price for the national currency is a good thing? People confabulate national identity with currency price, which is silly.

When Europe is doing (reletively) well, currency becomes scarce and the price of the Euro goes up. European produced goods become more expensive and imports become cheaper. Europe imports more and produces less and the price of the Euro goes down.

On the other side of the Atlantic, when America is doing (reletively) poorly, the price of the Dollar goes down. American produced items become cheaper than imports, and America produces more and imports less. The domestic economy improves and the Dollar goes up.

So the Dollar going up reletive to the Euro means that the US economy is doing reletively well at this point in time. But it also means that BMWs are going to be cheaper than Cadillacs and French wine will be cheaper than Two-Bux-Chuck's. This is not necessarily a good thing for the US economy.

The only thing worse, though, is not letting the currencies float. If countries try to control the cost of currency, everybody loses.