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A12 BUSINESS
Friday 8 July 2022

With U.S. dollar nearly equal to euro,

impact is being felt

By PAUL WISEMAN
AP Economics Writer
WASHINGTON (AP) — The
U.S. dollar has been surg-
ing so much that it’s near-
ly equal in value to the
euro for the first time in 20
years. That trend, though,
threatens to hurt Ameri-
can companies because
their goods become more
expensive for foreign buy-
ers. If U.S. exports were to
weaken as a result, so, too,
would the already-slowing
U.S. economy.
Yet there’s a positive side
for Americans, too: A stron-
ger buck provides modest In this Feb. 27, 2008 file photo, euro coins and dollar bills are
seen in Frankfurt, central Germany.
relief from runaway infla- Associated Press
tion because the vast ar-
ray of goods that are im- that day, the euro blew growth model that’s based
ported to the U.S. from past parity with the dollar on cheap Russian energy.
cars and computers to toys as huge U.S. trade deficits Europe is facing a seismic
and medical equipment and accounting scandals shift, and (the) euro needs
become less expensive. A on Wall Street pulled down to fall to reflect that.’’
strengthened dollar also the U.S. currency. A European slowdown
delivers bargains to Ameri- This year, the euro has could eventually give the
can tourists sightseeing in sagged largely because of European Central Bank
Europe, from Amsterdam growing fears that the 19 less leeway to raise rates
to Athens. countries that use the cur- and moderate economic
The U.S. Dollar Index, which rency will sink into reces- growth to address its own
measures the value of sion. The war in Ukraine has inflation problem. The ECB
American money against magnified oil and gas pric- has announced that it will
six major foreign currencies, es and punished European raise its key interest rate
has jumped nearly 12% consumers and businesses. by a quarter-point when
this year to a two-decade In particular, Russia’s re- it meets later this month
high. The euro is now worth cent reduction in natural and possibly by up to a
just under $1.02. gas supplies has sent prices half point in September. A
The dollar is climbing mainly skyrocketing and raised weaker euro feeds infla-
because the Federal Re- fears of a total cutoff that tionary pressures by mak-
serve is raising interest rates could force governments ing imports to Europe more
more aggressively than to ration energy to indus- expensive.
central banks in other coun- try to spare homes, schools Analysts at UniCredit said
tries are in its effort to cool and hospitals. (European global recession fears were
the hottest U.S. inflation in leaders have denounced a prime driver in foreign ex-
four decades. The Fed’s Moscow’s move as an ef- change markets “amid the
rate hikes cause yields on fort to blackmail Europe for general view that the Fed
U.S. Treasurys to rise, which backing Ukraine and em- might ultimately have more
attracts investors seeking bracing Western sanctions opportunity than many
richer yields than they can in the aftermath of Russia’s other central banks’’ to
get elsewhere in the world. invasion.) raise rates. The analysts also
This increased demand for Economists at Berenberg noted the dollar’s role as a
dollar-denominated securi- bank have calculated that globally recognized safe
ties, in turn, boosts the dol- at current rates of con- haven, in light of recent fi-
lar’s value. sumption the added gas nancial market turmoil, as
Also contributing to the cur- bill would be 220 billion another factor that’s boost-
rency’s appeal, notes Ru- euros ($224 billion) over ing demand for the buck.
beela Farooqi of High Fre- 12 months, or a whopping In the meantime, the dol-
quency Economics, is that 1.5% of annual economic lar’s rise is complicating an
despite concern about a output. already uncertain outlook
potential recession in the “This war is a ‘body-blow’ for the United States, the
United States, “the U.S. to Europe,’’ Robin Brooks, world’s biggest economy.
economy is on firmer foot- chief economist at the On the one hand, the stron-
ing compared to Europe.’’ institute of International ger greenback makes for-
Not since July 15, 2002, Finance banking trade eign goods less expensive
has the euro been valued group, tweeted this week. for Americans and eases
at less than one dollar. On “It undercuts Germany’s inflationary pressures.q