With the U.S. dollar at a 14-month low against the Euro, the pressure is on for the European Union to join Brazil and certain Asian economies in helping prop up the dollar.
Concerns were voiced today as the Euro continues its climb:
European Central Bank President Trichet said “excessive volatility” in currency rates is “bad for economic development.” His comment was seconded by Jean-Claude Juncker who said “It’s a problem that worries us.”
What you’re seeing now is a sharp reversal from the tone from just a few weeks ago, when central bankers were stoking rumours about a new reserve currency to replace the dollar. The European Central Bank is considering taking steps to ensure that the dollar doesn’t drop any further against the Pound and the Euro:
Investors are concerned that the Euro-Zone finance ministers convening at a regular meeting later in the day in Luxembourg could fire warning shots over EUR strength. This could ramp up pressure on the European Central Bank (ECB) to consider steps to curb any further rises in the currency, analysts said.
And it doesn’t end there…
DailyFinance: “We have to save the soldier dollar,” blares the headline in a recent economy column in France’s leading daily Le Monde. Columnist Pierre-Antoine Delhommais goes on to explain that if the dollar crashes, “exports would collapse, growth would sink and the unemployment rate would explode.” In fact, the euro’s nearly 19 per cent climb since March already seems to be wreaking havoc with the exports from the Eurozone’s 16 member countries. The European statistics office just announced that exports from the region fell 5.8 per cent in August compared with July.