Euro Losing Value over US Dollar

  • Fri Apr 18th 2008

(Ebru News/AP) The euro slid lower against the U.S. dollar in trading today; backing off the record high it had reached the day before, allaying slightly European concerns that its strength was becoming harmful. The 15-nation currency bought 1.5830 US dollars in early afternoon European trading, below the 1.5888 US dollars it bought in late trading in New York the night before.

That was more than a cent off the all-time high of 1.5982 US dollars it set on Thursday, as the euro zone grappled with rising inflation that has all but guaranteed no interest rate cuts by the European Central Bank.

As the euro gets stronger, it is causing some concern among companies and politicians in countries that use it, particularly fears it could dampen exports as European goods become more expensive to American buyers.

Some experts are even predicting that car and aviation companies could start moving their manufacturing operations to the U.S. to avoid the high euro and take advantage of the weak dollar.

The dollar has been weighed down by a combination of gloomy U.S. economic data and high European inflation - fuelling expectations that the U.S. Federal Reserve will continue cutting its interest rates, while the ECB will leave the cost of borrowing unchanged at 4 percent.

Lower interest rates can weigh on a nation's currency as traders transfer funds to countries where they can earn better returns, while higher rates are used to curb inflation.

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