BERLIN, 13 September 2007 — The euro broke through $1.39 to a new high yesterday, soaring amid speculation that the Federal Reserve will soon cut interest rates and a warning from the US treasury secretary that turbulence in financial markets may linger longer than thought.
The 13-nation euro rose as high as $1.3901 in late afternoon European trading — topping its previous record of $1.3852, reached on July 24. It almost immediately fell back to $1.3889, compared with the $1.3832 it bought in New York late Tuesday.
The euro’s strength threatens to make European exports more expensive, and therefore less competitive — although the currency’s movements this year have been gradual rather than abrupt.
The strong euro “is weighing on growth,” French Budget Minister Eric Woerth said after a Cabinet meeting in Paris yesterday. While the weaker dollar makes US exports more competitive, it hits the spending power of American tourists traveling to Europe.
The dollar, which has hovered within a few cents of its record low over recent weeks amid the market turmoil caused by the subprime mortgage crisis, had come under new pressure since the US Labor Department issued unexpectedly poor August jobs data on Friday.
The dollar was lower yesterday against the British pound, drifting down to $2.0296 from its level of $2.0317 in New York late Tuesday.
The US currency was lower against the Japanese yen, even as Prime Minister Shinzo Abe announced that he would resign, putting an end to his troubled year-old government. The dollar ambled down to 114.27 yen from 114.30 yen.
Meanwhile, European stock exchanges edged higher at the close yesterday, with the London FTSE 100 index ending the day with a gain of 0.41 percent at 6,306.20.
In Paris the CAC 40 rose 0.53 percent to reach 5,508.01 while in Frankfurt the DAX finished at 7,472.90 points, up 0.20 percent.
US stocks traded mixed yesterday. The Dow Jones Industrial Average drifted down 4.87 points (0.04 percent) to 13,303.53 and the NASDAQ composite rose 3.23 points (0.12 percent) to 2,600.60 at 1435 GMT.
The Standard & Poor’s 500 broad-market index rose a fractional 0.96 points (0.07 percent) to 1,472.45.
