Tuesday, May 20, 2003

Euro worth $1.17, near all-time high

The Associated Press

FRANKFURT, Germany - The euro edged closer to an all-time high against the U.S. dollar Monday, continuing a 16-month rally that has helped the fledgling currency win back respect.

Still, the ascent carries hazards for Europe's struggling economy.

Monday's euro surge above $1.17 came after U.S. Treasury Secretary John Snow said over the weekend that the dollar's fall was part of "really fairly modest realignments" in currency markets.

Markets interpreted Snow's comment at a Group of Eight meeting in France as meaning U.S. officials wouldn't step in to stop the dollar's slide.

The euro jumped to $1.1739 in European trading Monday, then fell back to just below $1.17. The last time it was higher was Jan. 15, 1999, at $1.1749. In late New York trading, the euro was quoted at $1.1643.

The euro is back almost to where it was when it was launched on financial markets with high hopes on Jan. 1, 1999, and is now just 2 cents short of its all-time record of $1.1884 of Jan. 4, 1999.

It's up 36 percent versus the dollar since February 2002.

Long slump

The steady climb is helping to boost the prestige of the European Union's 41/2-year experiment with a common currency - prestige that was dented by a long slump against the dollar that saw the euro as low as 82 cents.

But economists and politicians worry that the euro's rally could hurt the recovery of Europe's economy.

Economies contracted

By making exports more expensive compared with foreign competitors, the stronger euro could undermine the very businesses expected to lead to recovery on the Continent.

Growth in the economies of the euro was zero in the first quarter, and the economies of Germany, the Netherlands and Italy contracted slightly.

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