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post #1 of 19 (permalink) Old 02-29-2008, 02:06 PM Thread Starter
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Dollar falls again, euro zone divided

Dollar falls again, euro zone divided
By MATT MOORE, AP Business Writer
1 hour, 11 minutes ago



The dollar kept spiraling lower Friday, hitting another new low against the euro, as worries about the U.S. economy depress the currency and raise thorny issues in Europe about how to cope with the growing gap.

The euro flew past its previous high to hit $1.5238, before subsiding later in the day to $1.5192. The euro topped $1.50 this week for the first time since its 1999 introduction, then surged above $1.51 after markets took comments from Fed Chairman Ben Bernanke as a sign that yet more U.S. rate cuts are on the way.

"The dollar looks set to finish the month with yet more downside pressure being heaped upon it," said Gary Thomson of CMC Markets in London.

That has some of the United States' large trading partners in Europe considering their options, and drawing two very different reactions: alarm from the French, equanimity from the Germans.

Germany's manufacturing giants are keeping an eye on the record-high euro, but are also planning for the future, devising new strategies to mitigate the effect of the strong currency on their bottom line.

In France the concern is more palpable, with politicians calling for the European Central Bank to intervene to put the brakes on the euro's surge. Budget minister Eric Woerth this week called the "very high" euro "a handicap for our exports."

Planemaker Airbus has groused that for every 10 euro cents the common currency gains against the dollar, the company will lose as much as 1 billion euros ($1.5 billion) — and that adds up. Given that the euro has risen from $1.4726 on Jan. 2 to above $1.52, the cost to Airbus would be 500 million euros ($758.4 million) so far this year.

French President Nicolas Sarkozy even attacked the European Central Bank as part of his election campaign and has continued to harp on the ECB to do more. The bank's president, Jean-Claude Trichet, is steadfast in maintaining the institution's independence, and has stressed inflation, not the euro, as the looming problem.

In Germany, there's a mild concern about the euro's record rise of late — but most believe that it would take another 10-cent climb before panic was to set in.

"Once it reaches $1.60 it becomes painful, not least because the time periods are expiring for which companies have hedged themselves against currency fluctuations," said Hans-Werner Sinn, the president of the Munich-based Ifo institute, which conducts monthly surveys on business and investor sentiment.

He called that level not so much a threshold but a guideline. But that's not to say that German firms aren't feeling the pinch particularly when it comes to their currency hedging.

"To a large extent, short-hedging positions are running out and the effects of the euro are being felt," said Sinn.

The euro zone's biggest companies, and some mid-sized ones, too, all practice currency hedging, which entails purchasing financial contracts on the open market to lock in exchange rates to avoid any pitfalls in the event of big swings.

Automaker BMW AG — which employs 4,700 people at its plant near Spartanburg, S.C., where it produces the X5 SUV and the Z4 Roadster — announced this week it would cut another 5,600 jobs in Germany as part of its cost-cutting efforts. It said it could not rule out more if the euro keeps climbing.

And Volkswagen, AG, Europe's biggest automaker in terms of sales, has said it is looking at building a new plant in the U.S. or elsewhere — in part to avoid the high costs of the euro. Similarly, Porsche AG and Daimler AG are looking at new plants in countries not tied to the euro or the dollar, in places like India and China, to reduce costs and avoid the problems linked to the dollar's decline across many main currencies.

The dollar dipped to 104.07 Japanese yen on Friday from 105.36 yen in New York the night before, hovering around three-year lows. The British pound fell to $1.9841 from $1.9926.

Copyright © 2008 The Associated Press.
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post #2 of 19 (permalink) Old 02-29-2008, 02:33 PM
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Hell at this point does it really matter if it is $1.50, $1.51, $1.52, or $1.53?

Ok, sure if you are a company the size of Airbus it matters but to the individual does it really matter? What are a couple of cents with where things stand.
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post #3 of 19 (permalink) Old 02-29-2008, 03:59 PM
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Let's see, does it matter? Hmm, the stock market fell 350 points, and gas is going up to $4 a gallon. Hmm, does it matter? Gee, I dunno, that's a hard one.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

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post #4 of 19 (permalink) Old 02-29-2008, 04:01 PM
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post #5 of 19 (permalink) Old 02-29-2008, 04:05 PM
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post #6 of 19 (permalink) Old 02-29-2008, 04:09 PM
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post #7 of 19 (permalink) Old 02-29-2008, 06:37 PM
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Originally Posted by 430 View Post
Hell at this point does it really matter if it is $1.50, $1.51, $1.52, or $1.53?

Ok, sure if you are a company the size of Airbus it matters but to the individual does it really matter? What are a couple of cents with where things stand.
If 1% loss on every transEuro transaction doesn't mean anything to you, then no. But to the Trillions of dollars that are moved back and forth every day that little percent starts looking like real money.

And since the Euro has overtaken the Dollar as standard in many transactions, the problem is exacerbated.

The weak dollar helps some companies like Boeing that sells big jets or some of the pipeline companies but with the overall trade deficit in the multi hundred Billion range quarterly, the numbers work very strongly AGAINST us.

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post #8 of 19 (permalink) Old 02-29-2008, 06:38 PM
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You should learn to like it. You will be living with it's interest payments for the rest of your life.

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post #9 of 19 (permalink) Old 02-29-2008, 08:45 PM Thread Starter
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post #10 of 19 (permalink) Old 03-01-2008, 06:01 AM
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Let's see, does it matter? Hmm, the stock market fell 350 points, and gas is going up to $4 a gallon. Hmm, does it matter? Gee, I dunno, that's a hard one.
it could be the-stickiest-situation-since-sticky-the-stick-insect-got-stuck-on-a-sticky-bun, but gee I don't know either.
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