Euro rises above $1.16 to four-year-high

By DAVID McHUGH

May 12, 2003 | The euro rose above $1.16 to a four-year peak Monday as comments by U.S. Treasury Secretary John Snow helped propel the 12-nation European currency closer to its all-time high.

The euro hit $1.1621 in morning trading in Europe, the highest since Jan. 22, 1999, when it was $1.1624. In later trading, it fell below $1.16.

"When the dollar is at a lower level, it helps exports, and I think exports are getting stronger as a result," Snow said Sunday on U.S. television.

The euro is now about three U.S. cents away from its all-time intraday high of $1.1884, reached on Jan. 4, 1999 just three days after it was launched on financial markets.

Its highest daily average, as represented by the European Central Bank's reference rate used as a benchmark for trade contracts and other transactions, is $1.1789, reached on the same day.

Currency analyst Alexandra Bechtel at Commerzbank said Snow's comments indicate U.S. authorities won't intervene to stop the dollar's slide, and comes after remarks by European Central Bank head Wim Duisenberg last week that he also welcomed a stronger euro.

"Until the euro surpasses the rate at which it was introduced, there can be no question of intervention," she said.

The euro's 15-month rise has been driven by investor doubts about the U.S. economy and financial markets. As investors move money out of U.S. assets, they must sell dollars, driving down the exchange rate.

Other factors, economists say, included higher interest rates in Europe. That draws cash from the U.S., where rates are the lowest in four decades.

Most economists say the euro's rise is based more on the dollar's weakness than on any improvement in economic conditions in Europe, where growth remains sluggish. Some economists predict the euro will soon peak and then fall; others see the euro at $1.20 by year's end.

A stronger euro helps U.S. exporters sell into the European market, and helps European officials fight inflation by making imported energy, goods and raw materials cheaper. Many European economists said the euro had long been undervalued.

The euro's rally pinches the earnings of European exporters, however, and companies such as Volkswagen and Bayer have cited it as a drag on first-quarter profits.

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