Sliding euro raises concern

Currency dips below $1 for first time.

By BRUCE STANLEY

The Associated Press

LONDON --- Europe's fledgling single currency, the euro, tumbled below $1 for the first time ever Thursday, less than a year after it was launched, a symbolic benchmark in the fall of a currency some saw as a challenger to the dollar.

By breaching the psychologically important barrier, the euro heightened concern about its long-term viability. Eleven European nations formed the euro Jan. 1 in an ambitious effort to create a regional economic and monetary union.

The euro reached parity at 2:47 p.m. Topeka time, slipped as low as 99.97 cents and then rose just above $1. Its previous low was $1.0039, reached during trading Monday.

The single currency now has plunged 16 percent from its first day of trading, Jan. 4, when it quickly rose to an all-time high of $1.1886.

The euro's decline extended a ragged retreat over worries that European governments lacked the resolve to let free-market forces prevail without intervening to protect national businesses.

Economists and currency traders have said the euro's slide to parity with the dollar would have little immediate economic impact on the member countries of "Euroland" and their 292 million residents.

"The fact is that it's just hitting a new low," said Peter Gutmann, senior economist at National Westminster Bank Group.

By crossing such a highly visible threshold, the euro has given a black eye to supporters who had hoped the currency would challenge the dollar's supremacy in global financial markets. That dream now seems a distant memory for those who viewed the euro not just as a bold financial experiment but as a step toward the ultimate political unity of Europe.

On a more practical level, a weaker euro increases the risk of inflation. It also makes imports, including crude oil and other necessities, more expensive for European consumers.

As a result, the European Central Bank might come under more pressure to raise interest rates, a move that could discourage borrowing, throttle Euroland's gathering economic recovery and aggravate chronically high unemployment.

ECB president Wim Duisenberg said Thursday he wouldn't rule out intervening to support the euro, though he gave no details about if and when that might happen.

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