Bloomberg News

Euro May Fall Versus Dollar as Exports Drop: Chart of the Day

September 11, 2011

Sept. 12 (Bloomberg) -- The euro is poised to weaken against the dollar as falling German exports add to evidence that the region’s largest economy is losing momentum, according to FxPro Financial Services Ltd.

The CHART OF THE DAY shows seasonally adjusted German exports grew 16 percent in the year through April, while the euro gained 11 percent. They slid 1.8 percent in July from June, when they dropped 1.2, according to the Federal Statistics Office in Wiesbaden on Sept. 8. The 17-nation currency was little changed against the dollar in the period. The decline in exports increases the likelihood that the euro will decline, FxPro said.

“Should the German export machine continue to lose traction, then this is likely to place further pressure on the euro,” Michael Derks, chief strategist at FxPro in London, said by telephone on Sept. 9. “Germany relies on foreign demand to prosper, so with the rest of Europe and the U.S. hunkering down, it will suffer. A weakened Germany cannot be good for the euro at such an incredibly uncertain time.”

The euro fell 1.6 percent against the dollar to $1.3710 at 4:37 p.m. in London on Sept. 9. That left it 3.8 percent lower versus the dollar, on course for its biggest weekly drop since Aug. 13, 2010.

German growth is slowing as Europe’s debt crisis prompts governments from Spain to Ireland to cut spending, sapping demand for German products. The European Central Bank said on Sept. 8 that the euro region’s economic outlook has worsened as it cut its growth forecasts for this year and next. U.S. job growth stalled last month, adding to signs the world’s largest economy is weakening.

Derks said the euro may fall around 1.6 percent to $1.35 in the next two to three weeks. The shared European currency has weakened 0.8 percent this year against a basket of nine major peers, according to Bloomberg Correlation-Weighted Currency Indexes.

--With assistance from Mark McCord in London. Editors: Mark McCord, Daniel Tilles

To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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