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Euro heading for new heights
Published in Saudi Press Agency on 11 - 07 - 2007


The euro remained firmly above 1.37 dollars as
European trading drew to a close Wednesday, with analysts expecting
the common currency to press on to breach the key 1.40-dollar mark in
the coming weeks as concerns set in about the US economy, according to dpa.
This follows the euro hitting an all-time high of 1.3784 dollars
Wednesday with markets speculating about the prospects of the
European Central Bank (ECB) continuing its rate-setting cycle on the
back of a solid performance by the 13-member eurozone economy and
renewed inflation fears.
At the same time however, analysts are more uncertain about the
outlook for US interest rates with some dealers even talking about
US monetary authorities cutting borrowing costs following worries
about the impact on the nation's growth of the shakeout in the
housing market.
The pound also traded Wednesday at a 26-year high of 2.0352
against the dollar amid market expectations that the Bank of England
is planning further rises in the cost of money.
The European common currency's previous record of 1.3682 dollars
was set in April. Since then, economic data has continued to point to
the eurozone remaining on a growth track and shaking off slowing US
economic growth.
The rate-setting US Federal Reserve Board left its monetary policy
unchanged last month with a benchmark interest rate of 5.25 per cent.
Meanwhile, the ECB appeared to prepare the ground at its meeting
last week to deliver another rate hike in September, which would lift
its benchmark refinancing rate to 4.25 per cent.
This would be the ECB's ninth rate hike since the bank launched
its current cycle of tighter monetary policy in December 2005.
In a report released Wednesday, the investment house HSBC Trinkaus
& Burkhardt said that the euro's climb had now cleared the way for
the common currency to shoot past the 1.40 level with the next
resistance marker coming at 1.4160 dollars.
As trading in Europe drew to a close, the euro was hovering around
1.3760 dollars.
"The euro reflects the strength of (economic) developments in
Europe," ECB chief economist Juergen Stark told a meeting of
Frankfurt economics journalists Tuesday.
But he went on to say that the strong euro's impact on the
currency bloc's economic growth was less than in the past.
However, France's new President Nicolas Sarkozy has lashed out at
the strength of the euro, claiming that it had hit his country's
economic growth by dampening demand for French exports.
Moreover, the euro's climb has set alarm bells ringing about the
eurozone's key export machine with European shares chalking up
their second day of falls Wednesday.
After closing down 1.22 per cent Tuesday, the pan-European
EuroStoxx 50 dropped a further 1.3 per cent by lunchtime trading
Wednesday. By late afternoon the index was down 0.5 per cent.
Likewise, the Frankfurt stock exchange's leading DAX index also
pared back earlier losses. After falling 1.7 per cent in earlier
trading, the index had lost 0.8 per cent in late afternoon trading.
Germany is the world's leading export nation.
After making its debut on world forex markets at 1.18 dollars in
January 1999, the euro dropped about 25 per cent over the following
18 months or more, as concerns set in about the currency bloc's
economic outlook and as Europe's political leaders battled to reach
consensus on reform.
The common currency hit a record low of 82.52 US cents in October
2000. Euro notes and coins were introduced in January 2002.


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