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Euro Hits New Low Against U.S. Dollar

October 19, 2000|From Washington Post

BRUSSELS — The euro slumped to fresh lows against the dollar Wednesday amid a deepening crisis of confidence in the currency that has defied rescue efforts by the world's major central banks.

In one of its sharpest drops in a single day, the euro slid more than 2 cents to hit an all-time low of 83.3 cents in early trading. It closed at 83.8 cents in New York, down from 85.6 cents on Tuesday.

Wednesday's close was below the 84-cent level that triggered intervention in currency markets last month by the world's leading central banks, including the U.S. Federal Reserve. They spent an estimated $5 billion to support the beleaguered currency, driving it up to the 87-cent range--for a time.

The European Central Bank on Wednesday said it would hold a policy meeting today in Paris to consider further moves to prop up the euro, which has lost 29% of its value against the dollar since it was born in January 1999.

The latest tumble came after Wim Duisenberg, the ECB president, committed what was widely regarded as a serious blunder by breaking a code of silence about plans for further intervention. Asked by the Times newspaper of London if further action should be taken if a Middle East war provoked turmoil on foreign-exchange markets, Duisenberg replied, "I wouldn't think so."

The comment was broadly interpreted by the markets as a signal that further intervention by central banks wasn't likely soon.

Duisenberg's gaffe triggered a flurry of calls for his resignation.

The ECB could seek to raise interest rates in a bid to attract investment back to Europe and thus boost the euro. But having raised rates seven times this year, any further tightening could strangle Europe's economic recovery.

The winners as the euro continues to slide: American tourists in euro-zone nations, and European exporters, whose products get cheaper abroad as the currency falls.

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