Europe's economy is suffering as the euro continues to reach record highs against the weakening dollar, but the tumbling U.S. currency isn't necessarily bad news for the Czech economy
Published:
12 December 2004 y., Sunday
Europe's economy is suffering as the euro continues to reach record highs against the weakening dollar, but the tumbling U.S. currency isn't necessarily bad news for the Czech economy.
The dollar's weakness is hurting Europe by making its exports less competitive, but it has not affected Czech trade because the majority of the country's external exports stay within Europe. The Czech Republic has benefited from the weak U.S. currency, which is making expensive American imports cheaper here, but the country could see some negative effects in the future if key European economies continue to weaken.
The dollar has fallen 40 percent against the euro in the past two years. The euro reached a record high $1.32 on Nov. 25.
The crown, which is influenced by the strength of the euro, broke through its previous high of 25 Kc to the dollar at the end of October and has since strengthened to below 24 Kc to the dollar.
Economists have attributed the dollar's decline to investor concern over the country's high budget and trade deficits. The U.S. current account deficit, which includes annual trade as well as the balance of financial flows, is now some $600 billion.
President George W. Bush has said he's in favor of a strong dollar, but many observers believe the U.S. government would like to keep the dollar weak to strengthen the economy by making U.S. exports cheaper abroad and American products more competitive at home.
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