Dollar hits record lows against the euro

/ Source: The Associated Press

The dollar hit record lows against the euro Thursday for a second consecutive day, but regained some ground after a European Union official said the common currency was heading in an “undesirable” direction.

The euro threatened to break $1.60 for the first time ever, trading at $1.5982 in late-morning European trading, above the record $1.5978 it fetched Wednesday.

But the euro dropped back well under $1.59 after Luxembourg Prime Minister Jean-Claude Juncker, who leads talks among finance ministers from the 15 countries that use the currency, said it is moving in a “direction I don’t consider desirable.”

“I don’t have the impression that financial markets and other actors correctly and entirely understood the message of the G-7 meeting,” he added.

In their first shift in stance for four years, Group of Seven finance officials last week promised vigilance over the rapid decline of the U.S. currency. They said that “there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability.”

By late afternoon in Europe, the euro traded at $1.5924. The British pound climbed to $1.9800 from $1.9708, and the dollar nosed up to 102.11 Japanese yen from 102.04 yen.

The dollar has been weighed down by a combination of gloomy U.S. economic data and rate cuts by the Federal Reserve. The euro’s strength in comparison makes European companies’ goods more expensive overseas, raising fears that exports from the 15-nation euro zone will suffer.

It also makes life more expensive for Americans visiting or living in Europe.

U.S. Army Staff Sgt. Mark King and his wife, Amelia, said the euro’s steady rise since they were assigned to Germany in 2005 has crimped their efforts to travel around the continent.

“We can’t afford to see Germany and enjoy Europe,” said Mark King, of Anacoco, La., as the two ate lunch at a military facility in Heidelberg.

“Really and truly it prevents us from going out and eating,” Amelia King said, adding that the couple and their friends increasingly spend weekends at the base barbecuing food bought in dollars.

High inflation in the euro area has fueling expectations that the European Central Bank will keep holding interest rates steady, even as the Fed slashes the cost of borrowing.

Lower interest rates can weigh on a nation’s currency as traders transfer funds to countries where they can earn better returns, while higher rates are used to curb inflation.