The euro’s appreciation since February 2002 has already penalised European export industries. Furthermore, this trend is likely to extend into the medium term, due to the US current account deficit, which could rise above 5% of GDP in 2003 and 2004. Should international investors feel that such a ratio is not sustainable, then downward pressure on the dollar will increase. The euro’s rise then risks being all the stronger as America’s other trade partners may oppose any appreciation in their currencies. A strong rise in the euro will test the euro zone’s cohesion: losses in competitiveness in the euro zone will be felt unequally, as exposure to the dollar varies across countries and sectors.
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Article provided by CEPII research center in its journal La Lettre du CEPII.
Volume (Year): (2003) Issue (Month): 225 (July-August) Pages: Download reference. The following formats are available: HTML,
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Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements F31 - International Economics - - International Finance - - - Foreign Exchange E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System