Euro Update--falls below one dollar, first time ever

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Thursday December 2, 1999 4:34 p.m. EST

Euro Falls Below $1 for the First Time

LONDON (AP) -- Europe's fledgling single currency, the euro, tumbled below $1 for the first time ever on Thursday.

By breaching the psychologically important barrier, the euro heightened concern about its long-term viability. Eleven European nations formed the euro on Jan. 1 in an ambitious effort to create a regional economic and monetary union.

The euro reached parity at 3:47 p.m. EST, quickly slipped to 99.95 cents and then rose just above parity with the dollar. Its previous all-time low was $1.0039, reached during trading Monday.

The single currency now has plunged 16 percent from its all-time high of $1.1886, which it reached on the first day of trading, Jan. 4.

The euro's decline extended a ragged retreat over worries that European governments lacked the resolve to let free-market forces prevail without intervening to protect national businesses.

Economists and currency traders have said that the euro's slide to parity with the dollar would have little immediate economic impact on the member countries and their 292 million residents.

``The fact is that it's just hitting a new low,'' said Peter Gutmann, senior economist at National Westminster Bank Group.

On a more practical level, a weaker euro increases the risk of inflation. A weak euro makes imports, including crude oil and other necessities, more expensive for European consumers.

By crossing such a highly visible threshold, the euro has given a black eye to supporters who had hoped the currency would challenge the dollar's supremacy in global financial markets. That dream now seems a distant memory for those who viewed the euro not just as a bold financial experiment but as a step toward the ultimate political unity of Europe.

-- How low (will@it.go?), December 02, 1999

Answers

I liked it when a GI could get four Marks to a dollar.

-- Mark Hillyard (foster@inreach.com), December 02, 1999.

Isn't that going to make the American trade deficit worse? Is there anyone left out there who will be able to afford American exports? Tell me "conspiracies" that the American government is going to announce a deliberate devaluation of the dollar soon and I am game to believe it. How can we go on like this?

-- Paula (chowbabe@pacbell.net), December 02, 1999.

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