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Euro is likely to drop to parity with dollar next year

31 October 2008 11:09 (UTC +04:00)

The euro bought 1.2967 dollars in late New York trading compared with 1.2852 dollars it bought late Wednesday. The pound rose to 1.6444 dollars from 1.6314 dollars.
The dollar rose to 1.1376 Swiss francs from 1.1367 Swiss francs, and rose to 98.48 Japanese yen from 97.14 Japanese yen. It fell to1.2133 Canadian dollars from 1.2262 Canadian dollars.
In general, the euro has sold off sharply in recent months, with economic growth prospects for the 15-nation euro zone deteriorating sharply after the financial crisis that started in the United States spilled over to the rest of the world.
Several currency traders now say they expect the dollar to reach parity with the euro by the end of this year.
Hans Redeker of BNP Paribas in London said the global crisis was "manifesting into dollar strength".
It is possible that the prospect of falling US interest rates may offset some of this demand for the dollar, as the US already has the lowest interest rates of any G7 industrialized country.
Another potential limit on the dollarâ€™s rise, may be the flood of debt the US government will sell to finance its budget deficit and bank bailouts. However, most currency traders expect the dollar to continue to strengthen over coming months.
The meltdown in stocks and currencies from Asia to Latin America has spurred fears about the exposure of European banks, which had been aggressive in pursuing opportunities in emerging markets over the past decade.
The trends are also expected to influence manat-dollar and manat-euro rates in Azerbaijan. Agencies