- The Washington Times - Friday, June 21, 2002

FRANKFURT, Germany (AP) The euro rose to its highest level against the dollar in two years, edging above 96 U.S. cents yesterday as traders dumped the greenback over fears about the growing U.S. trade deficit and wobbly stock market.
The currency closed at 96.45 cents yesterday, its highest since June 2000, when it hit 96.53 cents.
New figures that showed the U.S. trade deficit at a record $35.9 billion in April helped push the euro up from levels just below 95.60 cents early in the day.
"That was the spike that took it over 96," said Nigel Anderson, a currency strategist at RBS Financial Markets in London.
The rally was motivated more by doubts about the dollar than conviction about the strength of the euro and the economies of the 12 countries that use it, he said.
Mr. Anderson said the current euro rally looked more solid than earlier ones, in which the currency moved toward parity one euro to the dollar only to fizzle out.
"The longer it continues, the more comfortable people are moving their assets into euros and that reinforces the upward trend," he said.
Trade deficits mean more dollars must be sold to get the foreign currency to pay for imports, driving down the dollar's exchange rate. Until recently, that was offset by foreigners needing dollars to invest in U.S. financial markets support that has waned as stocks have fallen.
The trade deficit was 10.7 percent higher than the $32.5 billion trade gap reported for March, the Commerce Department said yesterday.
Separately, the "current account" deficit, which is considered to be the broadest measure of trade, climbed to a record $112.5 billion in the first quarter of this year, the Commerce Department said in another report.
The current account includes not just the goods and services reflected in the government's monthly trade reports, but also investment flows between countries and transfers, including U.S. foreign aid payments.
In the monthly trade report, imported cars, parts and engines climbed to a record $16.8 billion in April. Imported goods, including televisions, VCRs, toys and clothes, also set a record of $24.9 billion
A stronger euro makes European vacations more expensive for Americans, but makes it easier for U.S. exporters to compete in Europe. The euro's rise has also lessened inflationary pressures in Europe, giving the European Central Bank more time to wait before raising interest rates.


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