Dollar hits new low against euro
Mark Tran
Friday December 12, 2003
The Guardian
The dollar today plunged to a new low against the euro as the US trade deficit swelled to $41.8bn (£23.9bn) in October and after an unexpectedly weak reading of consumer sentiment. The US trade gap widened as imports surged ahead of the Christmas shopping season, according to figures from the US commerce department.
Consumer goods, accounting for the largest chunk of the trade imbalance, rose 5.3% as America sucked in items such as TVs, VCRs and stereo equipment. The trade gap was slightly above the consensus forecast of Wall Street economists, who had predicted a deficit of $41.6bn.
For the first ten months of the year, the trade gap was $409bn, up by one-fifth, from a year ago, and the US is on course for a new record this year after last year's record $418bn. America's large trade gap is one of the main pressures on the dollar, which has dropped sharply this year amid concern that the US will find it increasingly hard to fund its twin trade and budget deficits.
The US currency has shed 17 cents against the euro this year, and seven cents in the past month alone. It fell to a new low against the euro today after a crucial gauge of US consumer sentiment came in well below expectations.
The University of Michigan's preliminary reading on consumer sentiment for December was 89.6, compared with market expectations of a rise to 96 from November's final reading of 93.7. The news added to pressure on the dollar as signs of weakening economic growth may hurt the performance of dollar assets.
The trade deficit with China, a politically sensitive subject, widened to a record $13.6bn in October, easily beating the previous record of $12.7bn set only last month. But exports to China also set a record.
America's growing trade gap has led to an upsurge in pressure for protectionist measures with China replacing Japan as the bogeyman for US firms. US manufacturers contend that China's policy of linking the value of its currency to the US dollar has undervalued the yuan by as much as 40%.
The Bush administration has been putting pressure on China to revalue its currency. However, Alan Greenspan, the Federal Reserve chairman, this week questioned whether a higher yuan would help lower the US trade deficit. He said that if Chinese goods such as textiles rose in price because of a strengthened currency, producers in other countries, not the US, might replace Chinese orders.
With US-China trade tension intensifying, Beijing warned the US about upholding dumping claims against wooden-furniture exporters, a ruling that could affect trade worth $1bn a year.
China's commerce ministry said Beijing is highly concerned about the furniture inquiry, the largest antidumping investigation ever conducted into imports from China.
The latest US commerce department investigation follows a US decision last month to impose quotas on certain Chinese textiles and apparel. Washington is also threatening antidumping duties on some Chinese-made colour TVs.
In afternoon trading, the dollar weakened to $1.2273 against the euro in New York from $1.2225 late yesterday. Earlier it reached $1.2278 against the euro, exceeding the previous record of $1.2276 on Tuesday. Against the Japanese currency the dollar fell to 107.73 yen from 108.05. On Tuesday it reached 106.75 yen, the lowest in more than three years.
Mark Tran
Friday December 12, 2003
The Guardian
The dollar today plunged to a new low against the euro as the US trade deficit swelled to $41.8bn (£23.9bn) in October and after an unexpectedly weak reading of consumer sentiment. The US trade gap widened as imports surged ahead of the Christmas shopping season, according to figures from the US commerce department.
Consumer goods, accounting for the largest chunk of the trade imbalance, rose 5.3% as America sucked in items such as TVs, VCRs and stereo equipment. The trade gap was slightly above the consensus forecast of Wall Street economists, who had predicted a deficit of $41.6bn.
For the first ten months of the year, the trade gap was $409bn, up by one-fifth, from a year ago, and the US is on course for a new record this year after last year's record $418bn. America's large trade gap is one of the main pressures on the dollar, which has dropped sharply this year amid concern that the US will find it increasingly hard to fund its twin trade and budget deficits.
The US currency has shed 17 cents against the euro this year, and seven cents in the past month alone. It fell to a new low against the euro today after a crucial gauge of US consumer sentiment came in well below expectations.
The University of Michigan's preliminary reading on consumer sentiment for December was 89.6, compared with market expectations of a rise to 96 from November's final reading of 93.7. The news added to pressure on the dollar as signs of weakening economic growth may hurt the performance of dollar assets.
The trade deficit with China, a politically sensitive subject, widened to a record $13.6bn in October, easily beating the previous record of $12.7bn set only last month. But exports to China also set a record.
America's growing trade gap has led to an upsurge in pressure for protectionist measures with China replacing Japan as the bogeyman for US firms. US manufacturers contend that China's policy of linking the value of its currency to the US dollar has undervalued the yuan by as much as 40%.
The Bush administration has been putting pressure on China to revalue its currency. However, Alan Greenspan, the Federal Reserve chairman, this week questioned whether a higher yuan would help lower the US trade deficit. He said that if Chinese goods such as textiles rose in price because of a strengthened currency, producers in other countries, not the US, might replace Chinese orders.
With US-China trade tension intensifying, Beijing warned the US about upholding dumping claims against wooden-furniture exporters, a ruling that could affect trade worth $1bn a year.
China's commerce ministry said Beijing is highly concerned about the furniture inquiry, the largest antidumping investigation ever conducted into imports from China.
The latest US commerce department investigation follows a US decision last month to impose quotas on certain Chinese textiles and apparel. Washington is also threatening antidumping duties on some Chinese-made colour TVs.
In afternoon trading, the dollar weakened to $1.2273 against the euro in New York from $1.2225 late yesterday. Earlier it reached $1.2278 against the euro, exceeding the previous record of $1.2276 on Tuesday. Against the Japanese currency the dollar fell to 107.73 yen from 108.05. On Tuesday it reached 106.75 yen, the lowest in more than three years.