updated 6/1/2005 8:36:25 PM ET 2005-06-02T00:36:25

The dollar rose to its strongest level in eight months against the euro Wednesday, a modest climb that could eventually lead to cheaper flights for Americans to see the Eiffel Tower in Paris or more bang for the buck shopping in Milan.

Major Market Indices

The slide by the European Union’s common currency was fueled by nagging doubts about European integration following the rejection of the EU constitution by French and Dutch voters.

The battered dollar has gained more than 3 cents on the euro this week. Analysts and currency watchers say the dollar would have to get much stronger than that for real values to be had, but if the momentum continued it could mean cheaper prices for U.S. tourists in Europe.

“Going from $1.25 to $1.22 is not going to have a pronounced effect on prices of imports from Europe to the U.S.,” said Peter Morici, an analyst and business professor at the University of Maryland. “Americans are not likely to see their BMW dealer cut prices or the price of French wine to be much lower as a consequence of this movement.”

For that to happen, the euro would have to plunge to lows not seen since it bottomed out at 82 cents in October 2000.

Late Wednesday in New York, the euro slipped below $1.22 for the first time in eight months. The currency used by 12 EU nations peaked at just under $1.37 at the end of last year.

Adding to the euro’s woes was an unsourced report in the German weekly Stern that raised the specter of a possible failure of the monetary union that created the currency in 1999, though that possibility was dismissed on both sides of the Atlantic.

“It’s still way, way too early in the game to think we would be going down that route,” said David Durrant, chief strategist at Julius Baer Investment Management in New York. “In the EU, they didn’t really have a backup plan if all 25 countries didn’t ratify the constitution. Certainly, that doesn’t mean there’s an unraveling” of the monetary union.

Peter Schiff, president of Newport Beach, Calif.-based Euro Pacific Capital, agreed.

“The fact remains that for all its flaws, the European Union at least lives within its means, as diminished as those means may be as a result of excessive government interference in the economy in general and labor markets in particular,” he said.

Carsten Fritsch, a currency strategist with Commerzbank, believes the euro could recover to $1.30 by the end of the year because of concerns over the U.S. trade and budget deficits, although that view is not universal.

“I heard squawking about that (U.S. deficits) when I got into this business many, many years ago. And through it all, the dollar rallied,” said David Solin, a partner at Foreign Exchange Analytics in Essex, Conn. “Theoretically, at some point it’s an issue. But I don’t think we’ve reached that point yet.”

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 5.03%
$30K home equity loan FICO 5.68%
$75K home equity loan FICO 4.87%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.42%
13.42%
Cash Back Cards 17.94%
17.94%
Rewards Cards 17.15%
17.15%
Source: Bankrate.com