Thursday May 8, 08:55 AM
Europe, U.S. united in desire for dollar to strengthen vs euro - report
LONDON (Thomson Financial) - The euro zone and the U.S. now have a united desire to see the dollar strengthen against the euro, senior officials told the Financial Times.
A top U.S. official said policymakers agree that foreign exchange markets have been focusing too much on short-term weakness in the U.S. economy, rather than the medium-term prospects for the U.S. and the euro zone, the newspaper said.
Senior euro zone officials believe the euro/dollar rate has reached levels unhelpful to both the U.S. and Europe, and authorities on both sides of the Atlantic want to ensure any recovery in the dollar is consistent rather than abrupt, the paper said.
The dollar is trading at eight-week highs against the euro, with the single European currency having declined steadily since striking an all-time high above $1.60 last month.
Analysts say the dollar is benefiting from hopes that the U.S. economy will recover quickly from its sharp slowdown thanks to a series of stimulus plans and the Federal Reserve Bank's aggressive cuts in interest rates since the autumn. The key Federal Funds rate is now 2.00 percent, down from 5.25 percent in September.
By contrast, the European Central Bank has kept its key rate on hold at 4.00 percent due to inflation concerns but data are beginning to point to an economic slowdown that could prompt the Bank to reduce borrowing costs later this year.
The FT said senior officials also welcome dollar strength because they agree that the currency's falls have contributed to the recent rise in oil prices.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
