Mighty euro kicking sand in weakening dollar's face
By Matt Moore
Associated Press
FRANKFURT, Germany — The euro climbed to a record high against the dollar yesterday as weak U.S. growth figures reinforced fears of a widening economic disparity between Europe and the United States.
The surge will not be kind to Americans visiting Europe this summer, who will pay more for hotel rooms in Rome, entrance fees at the Louvre and chocolates in Belgium.
The euro hit $1.3682, shooting past its previous high of $1.3667 from December 2004, after the U.S. Commerce Department reported that economic growth slowed to a 1.3 percent annual rate in the first quarter, its weakest performance in four years.
The 13-nation currency then settled back to $1.3655 in late European trading, still up from its $1.3601 level in New York late Thursday.
"After some mixed figures ... the euro has broken through its previous all-time," noted James Hughes, a market analyst at CMC Markets in London, adding that they saw some buy orders as high as $1.3681.
The euro also hit a record against the Japanese yen after inflation data from Germany, coupled with improved business and consumer sentiment, pushed it to 162.91 yen, up from the previous high of 162.53 yen on Thursday.
A higher euro makes goods from the euro-zone more expensive for customers abroad, or cuts into manufacturers' profits if they try to keep the U.S. dollar price of products constant.
Along with the rise in the British pound, which broke through $2 earlier this month for the first time in nearly 15 years, the stronger euro makes visits to much of Europe more expensive for travelers from elsewhere and makes shopping trips to the U.S. more appealing to Europeans.
Philadelphia physicians Ritu Pierce, 31, and Donna Roy, 36, had to make adjustments during their trip to Rome.
"It's definitely different from the past, when you could travel around Europe, especially in countries like Greece, with a small amount of money," said Pierce.
"We don't want to shorten our stay, so we are finding low-profile hostels to sleep and grocery stores to get pizza or wine for cheap," Roy said. "Thank God Rome has a lot of free beauties to offer, like monuments and beautiful piazzas. You don't need money to enjoy that."
Karen Sebastian, an American high school teacher visiting the Brandenburg Gate in Berlin with a group of high school students from Brattleboro, Vt., was startled by the dollar's slide.
"I am glad that I changed all my money before I came. It was a great shock when I saw what the exchange rate was," Sebastian said.
Yesterday, the British pound was trading at $2.0022, up from $1.9910 late Thursday. The dollar fell against the yen, dropping to 119.41 yen from 119.63 yen in New York.
The euro had been tantalizing close to a new high for nearly two weeks, climbing to $1.3664 on Wednesday. But expectations for poor U.S. economic results had traders certain that yesterday would be the decisive point.