The euro reached an all-time high against the dollar Friday when weak U.S. growth figures reinforced worries about a widening economic disparity between Europe and the United States.
The surge will not be kind to Americans visiting Europe this summer, who will feel the effect in higher prices for hotels in Rome, entrance fees at the Louvre and cherry beer in Belgium.
The weakening dollar is also contributing to Airbus’s woes, because most of the A380’s manufacturing costs are priced in euros but the plane is sold in dollars. Company officials say that, for every 10-cent decline in the dollar’s value against the euro, Airbus loses about $1.3 billion in revenue. That means that since the A380 project’s launch in December 2000, the tanking dollar has wiped out about $5.2 billion.
For perspective, the A380 was supposed to cost $12 billion development. The projected cost went up nearly 50% just because of currency valuations!
The only logical move for Airbus (and many other int’l corps) is to start selling in a currency other than Dollars. That is not good. At all.
A lot of countries are invested in the dollar. Countries, like any investor, sell when they see the value of their holdings fall.
Good thing we still import more than even the Roman patricians. Countries don’t want to see the dollar fall too far, lest their exports be worth less. Quite the chess game, but we don’t appear to be winning.
Guys - the economists amongst us can correct me on this if I’m wrong, but I believe that a relative-lower dollar makes US exports more competitive, and tends, economically, within reason, to be a Good Thing …
The reason those int’l companies trade in US dollars is because that has been the most historically stable currency and the Euro being strong for a few years is not going to change that any time soon.
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April 27th, 2007 at 2:55:44 pm
Don’t worry guys, the Europeans are feeling the pain, too:
For perspective, the A380 was supposed to cost $12 billion development. The projected cost went up nearly 50% just because of currency valuations!
April 27th, 2007 at 3:01:59 pm
Iraq’s Tourism Ministry just had it’s Spring Fair. Cheap for westerners! Unfortunately, major tourist sites are slightly destroyed right now. :-\
April 27th, 2007 at 4:33:29 pm
Hmm, i may have to re-think my opinion on Bush’s economic success. Anything we can do to screw Airbus is pretty good in my book ;-)
April 27th, 2007 at 4:40:38 pm
The only logical move for Airbus (and many other int’l corps) is to start selling in a currency other than Dollars. That is not good. At all.
A lot of countries are invested in the dollar. Countries, like any investor, sell when they see the value of their holdings fall.
Good thing we still import more than even the Roman patricians. Countries don’t want to see the dollar fall too far, lest their exports be worth less. Quite the chess game, but we don’t appear to be winning.
April 27th, 2007 at 5:07:20 pm
Guys - the economists amongst us can correct me on this if I’m wrong, but I believe that a relative-lower dollar makes US exports more competitive, and tends, economically, within reason, to be a Good Thing …
April 27th, 2007 at 8:22:53 pm
A weaker dollar is good for American exports and manufacturing, and bad for American consumers, as imports become relatively more expensive.
April 28th, 2007 at 1:55:07 am
ceilazul,
The reason those int’l companies trade in US dollars is because that has been the most historically stable currency and the Euro being strong for a few years is not going to change that any time soon.