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Unstoppable euro?

August 8, 2013

The euro has continued its steady rise against the US dollar, with analysts viewing the development as a sign of economic recovery in the area using the currency. But the surge might not be sustainable.

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Euro coins on dollar banknotes
Image: picture-alliance/dpa

The euro on Thursday surged to almost 1.34 against the US dollar, thus reaching its highest level in seven weeks. The currency used by 17 European nations last hit that mark on June 19, 2013.

"The euro is in pole position," said a statement from the Frankfurt-based Metzler Bank. It argued that the rise of the euro was helped in no small way by a monthly surge in German exports.

Official data released on Thursday showed the volume of German shipments abroad went up by 0.6 percent in June month-on-month, after sagging significantly in May.

Market imponderables

"There's reason to believe the eurozone is in a recovery process which keeps pushing up its single currency," Metzler Bank argued.

But the rise was also supported by news from China, with Beijing also reporting a strong increase in exports, signaling the world's second-largest economy was gaining momentum.

ECB leaes rate unchanged, hints at future cuts

"China provides a ray of hope for global economic dynamism," NordLB analyst Frederik Kunze told DPA news agency.

Economists also maintained that the US dollar was weakened by investors' uncertainty about the Federal Reserve's strategy, with many wondering when it might start deviating from its ultra-lax monetary policy.

hg/pfd (dpa, Reuters)