| Author (Person) | Bower, Helen |
|---|---|
| Publisher | ProQuest Information and Learning |
| Series Title | In Focus |
| Series Details | 16.7.02 |
| Publication Date | 16/07/2002 |
| Content Type | News, Overview, Topic Guide | In Focus |
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The euro reached parity with the dollar on 15 July 2002, for the first time since February 2000. However, the breakthrough is a reflection of the renewed anxiety about America's economy and the stock market rather than a stronger euro or a better outlook for Europe's economy. The dollar has fallen sharply in recent weeks as more corporate accounting scandals such as Worldcom have hit the United States leading investors to buy shares elsewhere. The release of consumer confidence figures by the University of Michigan on 12 July 2002 is also believed to have intensified traders' fears. The consumer sentiment index for July fell to 86.5 from 92.4 in June. Economists had expected the preliminary figure to be about the 93 mark but the actual figure is the lowest since November 2001 in the wake of the September 11 terrorist attacks in the United States. The single European currency opened on Monday at 98.93 cents but rose to $1.0064 by the end of the day. On 16 July it was still holding firm with one euro valued at $1.0074 in early morning trading. The euro hit its all-time high of $1.18 shortly after its launch on 1 January 1999, but then began a long slide, falling through the $1 mark in February 2000 and hitting a record low of 82.30 cents in October 2000. However, the euro has risen steadily since the launch of euro notes and coins on 1 January 2002 despite an absence of encouraging economic news from the 12 eurozone countries and only 0.3% growth in the first quarter of this year. While the slump of the dollar should make US export goods cheaper the news is not all good for Europe. The European tourist industry could be hit by a weaker dollar as Americans find it more expensive to spend in Europe and the export of goods such as French wine and German cars could also suffer. However, the European Central Bank is likely to welcome the news because it makes the euro appear stronger and may quieten critics who claim it is structurally weak. It should also help to keep inflation under control and makes it less likely that the European Central Bank will raise interest rates to control prices, a move that can hurt economic growth. The increased value of the euro against the dollar might also improve its image in the three EU countries - Britain, Sweden and Denmark - which have stayed out of the eurozone so far. In the United Kingdom, the Europhiles will be seeking to cash in on the increased strength of the euro by arguing that it would not be a weak replacement to the pound. However, the 'anti-euros' argue that the rapidly changing exchange rates make it more difficult for the UK to decide whether to adopt the single currency. In any case, the euro's rally is unlikely to last in the long term. If the United States resolves its corporate accounting problems then the dollar is set to strengthen once again and many economists forecast that the euro will be back at 98 cents by July 2003. Links: European Commission:
European Central Bank: United States Federal Reserve: United States: The Department of the Treasury: BBC News Online:
European Sources Online: Financial Times:
European Sources Online: In Focus
Helen Bower The euro reached parity with the dollar on 15 July 2002, for the first time since February 2000. |
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| Subject Categories | Economic and Financial Affairs |
| Countries / Regions | United States |
