Dollar Hits All-Time Low Against Euro

Dollar Hits All-Time Low Against Euro

BERLIN, Nov 17, 2004 (AP Online via COMTEX) -- The U.S. dollar dropped to a new all-time low against the euro Wednesday as the European currency rose to $1.3047 amid deep skepticism over Washington's commitment to a "strong dollar" policy.

Persistent worries over high oil prices and the U.S. trade and budget deficits have pushed the dollar to new depths against the 12-nation euro in recent weeks.

Last Wednesday, it rose above $1.30 for the first time since its launch in 1999, spiking up to $1.3007 - prompting European politicians to voice concern that the rally could hurt the continent's export-driven recovery.

The latest rise came as U.S. Treasury Secretary John Snow visits Europe. At the Royal Institute of International Affairs in London, he refused to comment on the euro hitting a new high against the dollar.

Snow insisted that there had been no change in the administration's support for a strong dollar. He also reiterated the administration believes international currency markets should be left to set the dollar's value.

"We believe in open, competitive currency markets," he said. "We think the world functions best with free trade and free capital flows. Nobody has ever devalued their way to prosperity."

Still, many analysts believe the administration has decided to voice support for a strong dollar to avoid rattling currency markets but to refrain from intervening to halt the dollar's fall since a weaker dollar will help lower the U.S. trade deficit by helping American exports.

"There is no single event that set off this movement today," said Dorothea Huttanus, an economist at DZ Bank in Frankfurt. She cited persistent doubts over the health of the U.S. economy and added that "doubts about the strong dollar policy won't go away" despite Snow's statements.

"The financial community doesn't believe him any more," Huttanus said.

The current rally has taken the euro from about $1.20 two months ago, prompting European Central Bank President Jean-Claude Trichet to call the surge "brutal" last week. Huttanus said she expected more such verbal interventions - although no action by the bank on currency markets - should the euro continue moving toward US$1.35.

For the countries that use the euro, the stronger currency raises fears that it will snuff out their moderate, export-driven economic recovery by making exports more expensive. But it takes much of the sting out of high oil prices on the continent, since oil is priced in dollars and the strong euro makes it relatively cheaper.

The euro, launched in 1999, languished under $1.00 for about 2 1-2 years between 2000 and mid-2002. It is now more than 57 percent above its all-time low against the dollar of 82 cents, reached in October 2000.

Last Monday, French Finance Minister Nicolas Sarkozy warned that market concern over the U.S. budget deficit is weakening the dollar and urged action.

"The U.S. must cut its budget deficit: this is an unanimous message from Europe and the International Monetary Fund which we're sending to our American friends," he said.

German Chancellor Gerhard Schroeder also struck a note of concern Tuesday.

"Everyone is concerned about the euro-dollar rate and the effect this has on exports," he said.

Snow said he planned to use meetings Saturday and Sunday in Berlin of the Group of 20 major industrial and developing nations, and discussions Thursday with finance ministers from Poland, Hungary, Slovakia and the Czech Republic, to promote stronger economic growth.

By GEIR MOULSON Associated Press Writer