IBC
09-12-2007, 10:15 PM
Euro hits all-time high against the dollar, tops $1.39
Updated 4h 4m ago | Comments 22 | Recommend 4 E-mail | Save | Print | Subscribe to stories like this
By Geir Moulson, Associated Press
BERLIN — The euro hit an all-time high against the dollar Wednesday, rising above $1.39 amid speculation that the Federal Reserve will soon cut key interest rates as much as half a percentage point.
The 13-nation euro rose as high as $1.3914 in trading in New York — breaking through its previous record $1.3852, reached on July 24. That compared with the $1.3832 a euro bought in New York late Tuesday.
The euro's strength threatens to make European exports more expensive, and therefore less competitive — although the currency's movements this year have been gradual, not abrupt.
The strong euro "is weighing on growth," French Budget Minister Eric Woerth said after a Cabinet meeting in Paris on Wednesday.
While the weaker dollar makes U.S. exports more competitive, it hits the spending power of U.S. tourists traveling in Europe.
FIND MORE STORIES IN: Wednesday | FED | Berlin | Bernanke
The dollar, which has hovered within a few cents of its record low over recent weeks amid market turmoil caused by the crisis over subprime mortgage lending, has come under new pressure since the U.S. Labor Department issued unexpectedly poor August jobs data last Friday.
That report strengthened speculation that the Fed will lower its target for a key interest rate at its Sept. 18 meeting. A cut from the current rate, 5.25%, would be the first reduction in four years.
The new dollar low came as "traders continue to second-guess how (Fed Chairman Ben) Bernanke and his team will act" next week, said James Hughes, a market analyst at CMC Markets.
Lower interest rates, used to stimulate the economy, can weaken a currency by giving investors lower returns on investments denominated in the currency.
Bernanke offered no hints during a speech in Germany on Tuesday.
"The fact no mention of monetary policy was made in yesterday's speech in Berlin has done little to placate the market, and we're also seeing growing speculation that the Fed may elect to cut rates by a half a point as they try to steer the economy away from recession," Hughes said.
The European Central Bank last week put its own two-year run of gradual interest rate rises on hold, but left many economists still expecting a quarter-point increase from the current 4% before the end of the year.
The dollar was lower Wednesday against the British pound, drifting down to $2.0302 from $2.0317 in New York late Tuesday.
The U.S. currency was lower against the Japanese yen, even as Prime Minister Shinzo Abe announced that he would resign, putting an end to his troubled year-old government. The dollar slid to 114.26 yen from 114.30 yen.
At Berlin's Brandenburg Gate, American newlyweds Doracy and Russell Harrison said the unfavorable exchange rate had prompted them to make some changes to their plans.
"Accommodation is where you really feel it," said Doracy Harrison, 27, of Raleigh, N.C., a program manager at an aquatic center.
"We probably wouldn't have come if were weren't staying with friends. We haven't been as gung-ho about eating out and have planned on low-key cafes instead of nicer places we'd usually eat."
Contributing: Associated Press writer Kristen Allen in Berlin
Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Updated 4h 4m ago | Comments 22 | Recommend 4 E-mail | Save | Print | Subscribe to stories like this
By Geir Moulson, Associated Press
BERLIN — The euro hit an all-time high against the dollar Wednesday, rising above $1.39 amid speculation that the Federal Reserve will soon cut key interest rates as much as half a percentage point.
The 13-nation euro rose as high as $1.3914 in trading in New York — breaking through its previous record $1.3852, reached on July 24. That compared with the $1.3832 a euro bought in New York late Tuesday.
The euro's strength threatens to make European exports more expensive, and therefore less competitive — although the currency's movements this year have been gradual, not abrupt.
The strong euro "is weighing on growth," French Budget Minister Eric Woerth said after a Cabinet meeting in Paris on Wednesday.
While the weaker dollar makes U.S. exports more competitive, it hits the spending power of U.S. tourists traveling in Europe.
FIND MORE STORIES IN: Wednesday | FED | Berlin | Bernanke
The dollar, which has hovered within a few cents of its record low over recent weeks amid market turmoil caused by the crisis over subprime mortgage lending, has come under new pressure since the U.S. Labor Department issued unexpectedly poor August jobs data last Friday.
That report strengthened speculation that the Fed will lower its target for a key interest rate at its Sept. 18 meeting. A cut from the current rate, 5.25%, would be the first reduction in four years.
The new dollar low came as "traders continue to second-guess how (Fed Chairman Ben) Bernanke and his team will act" next week, said James Hughes, a market analyst at CMC Markets.
Lower interest rates, used to stimulate the economy, can weaken a currency by giving investors lower returns on investments denominated in the currency.
Bernanke offered no hints during a speech in Germany on Tuesday.
"The fact no mention of monetary policy was made in yesterday's speech in Berlin has done little to placate the market, and we're also seeing growing speculation that the Fed may elect to cut rates by a half a point as they try to steer the economy away from recession," Hughes said.
The European Central Bank last week put its own two-year run of gradual interest rate rises on hold, but left many economists still expecting a quarter-point increase from the current 4% before the end of the year.
The dollar was lower Wednesday against the British pound, drifting down to $2.0302 from $2.0317 in New York late Tuesday.
The U.S. currency was lower against the Japanese yen, even as Prime Minister Shinzo Abe announced that he would resign, putting an end to his troubled year-old government. The dollar slid to 114.26 yen from 114.30 yen.
At Berlin's Brandenburg Gate, American newlyweds Doracy and Russell Harrison said the unfavorable exchange rate had prompted them to make some changes to their plans.
"Accommodation is where you really feel it," said Doracy Harrison, 27, of Raleigh, N.C., a program manager at an aquatic center.
"We probably wouldn't have come if were weren't staying with friends. We haven't been as gung-ho about eating out and have planned on low-key cafes instead of nicer places we'd usually eat."
Contributing: Associated Press writer Kristen Allen in Berlin
Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.