FRANKFURT, 22 September 2007 — The unstoppable euro broke through $1.41 yesterday to a new high, and drew renewed calls from French President Nicolas Sarkozy for the European Central Bank to follow the Federal Reserve and cut interest rates.
Despite the worries of some exporters — Airbus said if the euro keeps rising it may have to seek new cost savings — ECB President Jean-Claude Trichet and German Chancellor Angela Merkel stood firm that the ECB must remain independent.
The currency of the 13 euro nations, which have more than 317 million residents and account for more than 15 percent of global gross domestic product, surged as high as $1.4119 before falling back to $1.4076 by late afternoon, below the $1.40 it bought in New York on Thursday.
In other trading, the dollar slid to $2.0192 against the British pound from $2.0099 late Thursday. It rose slightly against the Japanese currency to 115.34 yen from 114.44 yen. The US dollar, which hit parity against the Canadian dollar on Thursday for the first time since 1976, rose slightly to $1.0016.
The dollar’s slide this week came on the back of a decision by the US Federal Reserve to cut its benchmark rate by a bigger-than-expected half a percent to 4.75 percent, a response to market turbulence in the US and elsewhere in the fallout from the subprime mortgage crisis.
“Furthermore, there are widespread expectations that the Fed will trim interest rates further over the coming months,” said Howard Archer, the chief UK and European economist for Global Insight. “In contrast, the European Central Bank still retains a clear bias toward raising interest rates further, despite shelving its original plans to act at its September meeting due to the current uncertainty and turmoil in global credit and financial markets.”
