Dollar weakens as a result of auto bailout uncertainty
KAISERSLAUTERN, Germany — Remember in November when the dollar was soaring against the euro?
Those days of an improving conversion rate appear to be over — at least for now — as the dollar slid to a seven-week low against the euro Thursday.
At Community Bank on Wednesday, $1.33 bought you one euro, according to its Web site. The next day that same euro cost you nearly $1.36, and the weekend conversion rate at Community Bank is $1.37
The exchange rate hasn’t been this bad since late October.
So why the sudden, drastic drop after predictions a few months ago that the dollar would continue to gain on the euro?
Blame it on everybody’s favorite whipping boys of late — the Big Three U.S. automakers: General Motors, Ford and Chrysler.
The dollar was undercut by the uncertainty over the auto industry bailout, the Associated Press reported. News about the U.S. Senate’s Thursday night rejection of a Big Three bailout continued the dollar’s downward trend against the euro.
Your pocketbook is likely to take another hit soon as oil prices rose 10 percent Thursday as the value of the dollar sank further and investors dumped money into crude markets, The Associated Press reported.
A few months ago, the exchange rate looked downright peachy for those overseas who are paid in dollars.
From July to October, the dollar strengthened against the euro. In July, it cost $1.60 for one euro. By late August, $1.46 bought you one euro. The exchange rate had dropped to $1.40 by early September, and was at $1.39 in mid October.
At the time, economists attributed the dollar’s rise to beliefs that a global recession would be more supportive for the U.S. dollar than the euro. In an Oct. 13 report, Stephen Jen, head of global currency research at Morgan Stanley in London, predicted one euro will cost between $1.20 and $1.25 in 2009.
Let’s hope that prediction still rings true.