How much worse can it get? The Wall Street Journal says today:
Skeptical markets drove the dollar to another all-time low Thursday against the euro, with the European currency climbing above $1.32 for the first time. The euro rose to a new high for a third consecutive day, breaking through Wednesday’s record of $1.3178. It then edged up to $1.3201 before slipping back beneath $1.32.
The current dollar slide, driven primarily by concerns over the US trade and budget deficits, has taken the euro from $1.20 about two months ago. It rose above the $1.31 mark for the first time Tuesday.
Many analysts are predicting the euro could hit $1.40 by the middle of next year, and European Central Bank President Jean-Claude Trichet recently called the rapid increase “brutal.”
Introduced in 1999 as the common currency for 12 European countries, the euro initially dropped against the dollar but has risen some 60% since hitting an all-time low of 82 US cents in October 2000.
The dollar’s current weakness has been helpful to US exports, making American products less expensive overseas, but European leaders have begun to worry openly that it might damage their fragile export-driven economic recovery.
The strong euro puts pressure on manufacturers of products like German luxury cars or French wines, whose dollar prices either have to go up or the companies have to live with lower profit margins.
Wall Street Journal | Dollar Continues to Fall Against the Euro, Yen (subscription required)
However, the finance ministers of the G-20 nations who met in Berlin this week don’t seem too concerned.