The dollar fell to a new low against the euro on Tuesday, amid persisting worries about the overall health of the U.S. economy.
The euro was quoted at $1.2320 in late European trading up from Monday’s $1.2284 record close. Later, in midday trading in New York, the euro traded at $1.2332.
Over the past several months, the euro’s surge has pushed it more than 17 percent higher against the U.S. currency this year, amid stubborn concerns over the U.S. budget and trade deficits, which economists say can undermine a country’s currency in the long term.
“The current account deficit remains at an all-time high,” said Michael Woolfolk, senior currency strategist at the Bank of New York. “This proves the smoking gun of the dollar’s demise this year.”
Just how little the dollar rallied on news of Saturday’s capture of former Iraqi leader Saddam Hussein “just goes to show that it’s very, very difficult for the dollar to find anything that will support it,” said Jane Foley, currency analyst Jane Foley with Barclay’s Capital in London.
But Dorothea Huttanus, an analyst at Dresdner Bank in Frankfurt, sees the euro’s climb as self-perpetuating upward spiral sustained by thin year-end trading that she predicts will not last into 2004.
“The dollar is actually a much more solid currency than the euro could ever be,” Huttanus said, noting that despite the U.S. deficit, enough positive signals are coming out of the United States to drive the euro back down next year.
Earlier this month, the European Central Bank dismissed concern about the surging euro, which it oversees, and president Jean-Claude Trichet refused to be drawn on whether there was a threshold that the bank would consider too high.
Some analysts have said the bank might intervene if the euro continues a rapid climb by selling euros to slow the currency’s rise to a more orderly pace.
Against other currencies, the dollar bought 107.60 yen at midday in New York, up from 107.52 Monday. The pound was worth $1.7517 in midday trading in New York, up from $1.7461 a day earlier.