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Euro Hits 2-Year High Against Dollar
Associated Press ^ | 20 June 2002 | DAVID McHUGH

Posted on 06/20/2002 11:22:14 AM PDT by Asmodeus

FRANKFURT, Germany (AP) - The euro rose to its highest level against the dollar in more than two years Thursday, climbing above 96 U.S. cents as traders dumped the greenback over fears about the growing U.S. trade deficit and wobbly stock market.

The currency reached 96.45 cents in afternoon European trading, its highest since March 2000, when it traded at 96.53 cents.

New figures that showed the U.S. trade deficit at a record dlrs 35.9 billion in April helped push the euro up from levels just below 95.60 cents early in the day.

"That was the spike that took it over 96," said Nigel Anderson, a currency strategist at RBS Financial Markets in London.

The rally was motivated more by doubts about the dollar than conviction about the strength of the euro and the economies of the 12 countries that use it, he said.

Anderson said the current euro rally looked more solid than earlier ones, in which the currency moved toward parity — one euro to the dollar — only to fizzle out.

"The longer it continues, the more comfortable people are moving their assets into euros and that reinforces the upward trend," he said.

Trade deficits mean more dollars must be sold to get the foreign currency to pay for imports, driving down the dollar's exchange rate. Until recently, that was offset by foreigners needing dollars to invest in U.S. financial markets — support that has waned as stocks have fallen.

A stronger euro makes European vacations more expensive for Americans, but makes it easier for U.S. exporters to compete in Europe. The euro's rise has also lessened inflationary pressures in Europe, giving the European Central Bank more time to wait before raising interest rates.

The euro hit its all-time high of $1.18 shortly after its introduction in January 1999. Notes and coins were introduced in 12 European Union ( news - web sites) countries on Jan. 1.


TOPICS: Business/Economy; Extended News; Foreign Affairs; Government; News/Current Events
KEYWORDS: dollar; euro; financialmarkets; stockmarket; tradedeficit

1 posted on 06/20/2002 11:22:14 AM PDT by Asmodeus
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To: Asmodeus
Buy American --- if you can still find anything made in America
2 posted on 06/20/2002 11:30:15 AM PDT by Lexington Green
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To: Asmodeus
The Euro will be "about a dollar" until one of two things happens. Either some Eurozone country won't live up to the fiscal responsibility agreement, or one pulls out due to "tax harmonization".
3 posted on 06/20/2002 11:35:32 AM PDT by Salman
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To: Salman
The upward drift of the Euro seems to have begun when the French and German currencies where phased out a few months ago. Could the Euro's strength be derived from the strength of the former Deutschmark? One strong economy could drag the rest along.
4 posted on 06/20/2002 11:39:33 AM PDT by RightWhale
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To: RightWhale
Many software websites in europe sell their products as
one dollar equals one euro.

I think european technocrats want a 1 to 1 ratio.
5 posted on 06/20/2002 11:47:21 AM PDT by Greeklawyer
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To: Salman
"The Euro will be "about a dollar" until one of two things happens. Either some Eurozone country won't live up to the fiscal responsibility agreement, or one pulls out due to "tax harmonization"."

What struck me when I first read about the 3% deficit rule is that in would incentive each country to increase deficits and employ accounting tricks to hide higher deficits since it would advantage them over the others. Could learn a lot from the Americans. ;)

Anyway, the years when our deficit spending was protected from inflation by dollars being absorbed in the world economy are coming to an end, I think.

6 posted on 06/20/2002 11:51:43 AM PDT by Shermy
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To: Greeklawyer
When the Canadian dollar was within 10% of the $US, sometimes higher, sometimes lower, they were accepted in neighboring states as equal, especially in stores. Once they drifted apart enough, many merchants in the US stopped accepting Canadian money at all. The $EU is probably close enough to the $US that it doesn't matter which is used right now.
7 posted on 06/20/2002 11:56:25 AM PDT by RightWhale
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8 posted on 06/20/2002 11:57:42 AM PDT by the
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To: Asmodeus
The rally was motivated more by doubts about the dollar than conviction about the strength of the euro and the economies of the 12 countries that use it, he said.

Nuff said.

9 posted on 06/20/2002 12:21:48 PM PDT by Gaston
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To: Asmodeus
Your fast track to trade deficits at work. Another deficit record set last month. Sorry, Buchanan, we should have listened to you on the economy. (also on immigration and foreign entanglements).
10 posted on 06/20/2002 1:52:49 PM PDT by ex-snook
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To: the

Note that the bottom of the graph is 1.00 not zero. A more honest zero based graph would show a less dramatic fluctuation.

11 posted on 06/20/2002 2:24:02 PM PDT by Salman
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To: RightWhale
The upward drift of the Euro seems to have begun when the French and German currencies where phased out a few months ago. Could the Euro's strength be derived from the strength of the former Deutschmark? One strong economy could drag the rest along.

Absolutely. The Euro is Deutschemark lite. In effect, the Deutschemark was slightly inflated and the Eurozone adopted it. A fiscal mess up by (for example) Italy, or the admission to EU membership for political reasons of (for example) Poland could devalue it.

A more likely scenario for the Euro devaluation is some major member pulling out over economic regulations not directly related to the currency. Like Brussels trying to dictate the composition of German sausages or French wines. Hell, they even regulate stuff like the shape of bananas, but that doesn't directly impact one member over another.

12 posted on 06/20/2002 2:33:57 PM PDT by Salman
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To: Lexington Green
Buy American --- if you can still find anything made in America

Alternatively, you could behave as a free man and a rational consumer, buying the quality you desire at the best price, thereby insuring that American industry is subjected to the benefit of competition, and that capital, labor and other resources will tend to be used where they are most productive and therefore competitive, thus raising the wages of American workers, and the returns of American investors, and the standard of living of American consumers.

Of course even if you do your little bit as an individual to lock resources into less productive enterprise by irrational "buy American" descisions, you can at least rest assured that you won't do as much damage to our economy as our own President has done with his recent lumber and steel tarrifs (alas).

13 posted on 06/20/2002 3:54:58 PM PDT by Stultis
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To: Salman
I guess that central bank lending rates are set (and money supply managed) by EU people in Brussels? How does that work? Seems like it might work fine as long as things are good, but if any of the major countries were disproportionately affected by a recession, there could be trouble. Were they at least smart enough to let the Bundesbank people take over the central banking, or did they let the French (or, God forbid, the Italians) do it?
14 posted on 06/20/2002 4:08:00 PM PDT by walden
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To: Lexington Green; Stultis
Buy American --- if you can still find anything made in America.

A weak dollar helps American manufacturers that export their products. Chew on that for a while . . . .

15 posted on 06/20/2002 5:09:12 PM PDT by 1rudeboy
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To: Asmodeus
The euro is managed by there own european version of the FED, which is , to put it nicely, incompetent. I think the french actually have a lot of say, and considering the fact that the country is in permanent recession and happy about it. The Union is going to have alot of problems.
16 posted on 06/20/2002 5:40:10 PM PDT by Sonny M
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To: Asmodeus
The euro rose to its highest level against the dollar in more than two years Thursday

Thanks Alan Greenspan.

17 posted on 06/20/2002 7:35:15 PM PDT by FreeReign
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To: walden
I guess that central bank lending rates are set (and money supply managed) by EU people in Brussels? How does that work?

Essentially, it's all from HQ in Brussels, but that doesn't mean it's a all the Belgians. It's mostly French an Germans, with input from all the others.

Seems like it might work fine as long as things are good, but if any of the major countries were disproportionately affected by a recession, there could be trouble.

Precisely.

They are least smart enough to let the Bundesbank people take over the central banking, or did they let the French (or, God forbid, the Italians) do it?

I truly do hope so. But I don't trust the Bundesbank in the long run.

18 posted on 06/20/2002 8:25:13 PM PDT by Salman
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To: 1rudeboy; Salman
Here is a graph covering the last four years that I generated at this site. While we may be at the two year low for the U.S. Dollar versus the euro, we are still quite a way from the four year low.

Dollar still VERY strong when looked at on a longer horizon.

19 posted on 06/20/2002 8:58:02 PM PDT by the
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To: Salman
I think that the "euro" european central banking is being done from Frankfurt am Main.
20 posted on 06/20/2002 8:59:14 PM PDT by the
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To: Salman
Thanks, you have added to my understanding of this stuff. I'm an accountant, not an economist, so the advent of the euro (except for my sentimental respect for the British pound, and before the euro, the German DM) had always seemed to me to be a good idea-- at least until I finished Margaret Thatcher's new book "Statecraft". Highly recommended! I don't pretend to really understand this stuff, but she makes a lot of sense.
21 posted on 06/21/2002 12:48:21 AM PDT by walden
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To: walden
The HQ of the EU is in Brussels (capital of Belgium). That does not mean that the EU is controlled by Belgians. The EU is controlled by

"'Tis a fine old conflict let each stand in its place
The international bureaucrat will be the Human Race."

22 posted on 06/21/2002 5:26:01 PM PDT by Salman
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To: the
I think that the "euro" european central banking is being done from Frankfurt am Main.

You are right. The Bank of Frankfurt is to the Euro what the Federal Reserve Bank (a private bank BTW) is to the US dollar.

23 posted on 06/21/2002 6:01:36 PM PDT by Salman
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To: the
This graph also would be more honest and less dramatic if properly zero based.
24 posted on 06/21/2002 10:35:17 PM PDT by Salman
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To: Salman
I agree on the drama, but using a computer screen of limited resolution, I think that a non-zero Y-axis graph provides a lot more detail, and can be more informative.


25 posted on 06/22/2002 7:59:31 AM PDT by the
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