FRANKFURT: The dollar sank to its lowest level ever against the euro Wednesday as fears about a steeper economic downturn in the United States intensified. President Nicolas Sarkozy of France, who has been the most vocal leader in Europe in decrying the impact on exports, told his new finance minister to seek an accord among euro-zone countries for managing exchange rates. The euro, used by 13 countries from Ireland to Slovenia, traded as high as $1.3787 against the dollar, and was also up against the British pound, which hit a new 26-year high of $2.0363. The euro was also up sharply against the Japanese yen, to around 168 yen to the euro. This picture of global currency gyrations - with the dollar the clear loser and the euro the only clear winner - reflects a similar conviction about economic fundamentals that has taken shape in recent weeks, economists said. The rapid deterioration of the American housing market is being felt through higher interest rates and a rise in defaults hitting the complex financial instruments used to bankroll shaky mortgages. That has nurtured a view of a weaker U.S. economy.
FRANKFURT: The dollar sank to its lowest level ever against the euro Wednesday as fears about a steeper economic downturn in the United States intensified. President Nicolas Sarkozy of France, who has been the most vocal leader in Europe in decrying the impact on exports, told his new finance minister to seek an accord among euro-zone countries for managing exchange rates.
The euro, used by 13 countries from Ireland to Slovenia, traded as high as $1.3787 against the dollar, and was also up against the British pound, which hit a new 26-year high of $2.0363. The euro was also up sharply against the Japanese yen, to around 168 yen to the euro.
This picture of global currency gyrations - with the dollar the clear loser and the euro the only clear winner - reflects a similar conviction about economic fundamentals that has taken shape in recent weeks, economists said.
The rapid deterioration of the American housing market is being felt through higher interest rates and a rise in defaults hitting the complex financial instruments used to bankroll shaky mortgages. That has nurtured a view of a weaker U.S. economy.
Angela Merkel's political honeymoon with Nicolas Sarkozy came to an end on Wednesday when the German chancellor warned the French president to stop undermining the euro and the independence of the European Central Bank. The abrupt rebuff ended weeks of diplomatic silence from Ms Merkel over Mr Sarkozy's flurry of contentious economic proposals.Asked by German television whether she supported the president's calls for a weaker euro to help eurozone exports, she answered "absolutely not. I would definitely object to this, and so would the entire government"."The population should be protected against inflation. This is very important. That is why the independence of the European Central Bank is the alpha and omega. And that is why Germany will not budge on this," she said.
Angela Merkel's political honeymoon with Nicolas Sarkozy came to an end on Wednesday when the German chancellor warned the French president to stop undermining the euro and the independence of the European Central Bank.
The abrupt rebuff ended weeks of diplomatic silence from Ms Merkel over Mr Sarkozy's flurry of contentious economic proposals.
Asked by German television whether she supported the president's calls for a weaker euro to help eurozone exports, she answered "absolutely not. I would definitely object to this, and so would the entire government".
"The population should be protected against inflation. This is very important. That is why the independence of the European Central Bank is the alpha and omega. And that is why Germany will not budge on this," she said.
As for Merkel, saying the "population must be protected from inflation" when you have in fact obtained a competitive advantage by reducing labour costs on that same population's back, takes a fair amount of chutzpah. When locusts move on, they leave nothing behind
This does not preclude high wages (quite the opposite in fact), as Germany shows, and only requires that wage increases be in line with productivity increases.
The recent crunch on Germa nwages has come from the combination of an overvalued DM entering the euro (misplaced pride), and the zeitgeist of relentless focus on company profits, which has unfairly tipped the balance too far in sharing productivity gains. In the long run, we're all dead. John Maynard Keynes
What I object to in Merkel's statement is the inference that the "population"'s interests are being protected when in fact it's the "population" and other economies in the eurozone that are footing the bill for the mark euro. When locusts move on, they leave nothing behind
