For the first time in months, the common European currency reached parity with the American dollar. Traders are concerned about a weakening U.S. economy
Traders reacted to news that unemployment is on the upswing in the U.S.
The euro reached parity with the U.S. dollar in the course of Friday trading -- the first time since July that the common European currency has been on par with American currency.
In mid-afternoon trading, the euro was valued at $1.0003 as currency traders worried about a weak U.S. economy. By the end of trading, the euro fell to $0.99.
The results followed several disappointing economic reports in the U.S: On Friday, the Labor Department reported that U.S. unemployment climbed to 5.7 percent in October from 5.6 percent a month earlier.
And the Institute for Supply Management issued a report that showed further slowing in the manufacturing industry. The ISM's closely watched factory index slipped to 48.5 from 49.5 in September. A reading of below 50 shows shrinkage in the manufacturing sector.
These numbers “gave the euro the last kick,” said David F. Milleker, a U.S. expert at Allianz in a report published by Spiegel Online.
Milleker does not expect further gains by the euro, however, and said he believe the currency is fairly valued between $0.95 and $1.00.
When the euro was launched on January 1, 1999, it was valued at $1.20 but it lost more than a fifth of its value over the following two years in response to sluggishness in the European economies. A stronger euro makes European exports pricier and thus less competitive internationally. Conversely, it cuts the price of imports and helps curb inflation.