Newsstand - Euro hits two-year high against dollar

The euro hit a two-year high against the dollar today on expectations that euro zone interest rates will soon rise.

The single currency also raced to a record high against the yen as investors awaited a meeting of Group of Seven finance officials later in the day.

Traders expected G7 officials would not single out yen weakness at the gathering in Washington. In that case, the low-yielding yen could come under even more pressure.

Indications from the European Central Bank (ECB) yesterday that it will raise rates in June or beyond to stem inflation helped drive the euro to $1.3524 on electronic trading platform EBS, its highest since January 2005.
http://www.ireland.com/newspaper/breaking/2007/0413/breaking19.htm

I'm waiting (though not with anticipation, I earn USD and often spend GBP) for the dollar to drop to 50p. Right now it's at 50.347, or 1.9862 $/£, and has been falling steadily for weeks.

I have been through several cycles of high dollar low dollar v. the Euro (and its precursors).

While it doesn't look like it now (it never does) I suspect that this cycle will be turning soon.

What is your definition of "soon?" Are you tying this to some event like the 08 elections?

Man, I hope it swings soon. I spend more time in LUX than I spend back home in the states and the exchange rate is killing my budget

While I love the current exchange rate and expect to see a new high beyond 1,3667 next week, wich a maximum risk of touching 1,40. From there, it should bounce back and could, medium-term, go as far back as into the 1,24 region.

What is your definition of "soon?" Are you tying this to some event like the 08 elections?

Nope, just an observation on past history. I mean, I like to have coffee in a Paris cafe, but six or seven bucks is a little out of line for a petite creme. Purchasing power parity may not be achieved, but that's the way to bet.

I remember when it was less than four French Francs to the $, and when it was pushing ten.

No one can predict what might happen to change the rate, but the Euro is clearly way over valued.

As long as the USA continually dumps oodles-o-money down the Iraq rat hole, the corporate welfare rat hole, the poverty rat hole, the military/industrial rat hole etc the dollar will keep sinking as everyone will demand more and more discounts to buy and hold dollars.

MisterNice

As long as the USA continually dumps oodles-o-money down the Iraq rat hole, the corporate welfare rat hole, the poverty rat hole, the military/industrial rat hole etc the dollar will keep sinking as everyone will demand more and more discounts to buy and hold dollars.

MisterNice

For all the $$$ being dumped down various rat holes, on the whole European nations tend to dump even more. Corporate welfare isn't the reason for the dollar's depreciation.

As the story indicates, the Euro's appreciating on expectations of higher interest rates. Higher US rates would have a similar effect on US currency...

As long as the USA continually dumps oodles-o-money down the Iraq rat hole, the corporate welfare rat hole, the poverty rat hole, the military/industrial rat hole etc the dollar will keep sinking as everyone will demand more and more discounts to buy and hold dollars.

MisterNice


Yea, that's it. Iraq and evil corporations are causing currency fluctuations. :rolleyes:

This makes it more difficult for me to travel on my own dime in Europe. I'm looking at other travel options to make my money go further or at least as far as possible.

I have been through several cycles of high dollar low dollar v. the Euro (and its precursors).

While it doesn't look like it now (it never does) I suspect that this cycle will be turning soon.

May be. What I think is happening is a down cycle in a downward trend. The USD may bounce back against the EUR in the future but not recover to previous peaks before starting another downward trend.

As long as the USA continually dumps oodles-o-money down the Iraq rat hole, the corporate welfare rat hole, the poverty rat hole, the military/industrial rat hole etc the dollar will keep sinking as everyone will demand more and more discounts to buy and hold dollars.

MisterNice

Add to that negative savings, budgetary deficit, trade deficit. The USD is propped up by the continued generosity of foreign investors.

I'm waiting (though not with anticipation, I earn USD and often spend GBP) for the dollar to drop to 50p. Right now it's at 50.347, or 1.9862 $/£, and has been falling steadily for weeks.

You didn't have to wait too long right now the $ is buying £0.49865
^

You didn't have to wait too long right now the $ is buying £0.49865
^

Real time spot exchange rates from OANDA:

GBP 1 = USD 2.007

:td: Great, just great. I just made a wire transfer to a Namibia tour outfit. I put a deposit 18 months ago (euros required, no credit cards). I foolishly thought why pay the entire lot up front, lose that bit of interest?

Now, 18 months later...

negative savings

The "negative savings rate" is a misnomer. The statistic tracks only savings. It does not track investing, increased equity, increased net worth, 401ks, IRAs, stocks, bonds, etc. The way people "save" has changed. We've moved away from savings accounts and CDs and moved to IRAs, 401ks, paying down mortgages which increases equity, stocks, bonds, etc. and the "savings rate" decline is reflecting that shift.

Last year we "saved" just over 32% of our gross income. That money went into a 401k, IRAs, ESAs, 529s and principal reduction (increased equity) on our mortgage. My "savings rate" for last year would be 0% following the rules under which the "savings rate" is calculated.

budgetary deficit

The federal budget deficit is in the same range as a percentage of GDP as it has been for many years. We are currently slightly over the 40-year average but it is, and has been, declining for some time.

trade deficit

US manufacturing output is at all time highs--even AFTER adjusting for inflation. About half of our trade deficit is from oil imports. The remaining half is because Americans have the resources to buy the goods and services produced around the world. If American's no longer have those resources then we will buy a lot less foreign goods. Those who have money, buy. That shouldn't be a surprise.

...the Euro hit an all-time high against the US$...$1.36

to LarryJ: debt continues to pile-up at all-time highs as a percentage of household disposable income, private debt as a percentage of GDP, and as a percentage of overall home values. Home values doubled over the past 6 or so years but equity as a percentage dropped due to mortgage debt levels that more than doubled. The US faces global competition which forces wages from going up all that much, so debt servicing takes a greater percentage of income than ever before.

Meanwhile, the US and indeed most Western countries are expanding their currencies like crazy (M3 over 10%, and in UK over 14%, similar increases for the Euro) which is what inflation is all about. The inflation manifests as asset inflation rather than price inflation, and the inflated assets are used as collateral for yet more loans which fund yet more asset inflation. It's not a pretty picture but it isn't just the US$ that is at fault. You can see this as all major currencies fall against the price of gold.

Well, there's also the prospect of much bigger budgetary deficits to come in the future as entitlement expenditure (namely, social security) starts to balloon.