Dollar Rises 7.8% against Euro, US Exports Affected

The dollar rose 7.8 percent against the euro last quarter and 6.7 percent against a group of 10 currencies, a movement that puts U.S. companies at a disadvantage by making their products more expensive overseas.

Most times when the dollar appreciates, the National Association of Manufacturers is quick to express its concern that a stronger currency will hurt exports. Now, it’s more worried about the state of the world economy.

Deutsche Bank sees the dollar strengthening to $1.25 per euro by year-end, and to $1.15 in 2015, from $1.27 on 7 Oct. It predicts the U.S. currency will rise to 120 yen in 2015, from 108 on 7 Oct.

A stronger dollar “is not helpful for our ability to sell exports to Europe,” Chad Moutray, chief economist at the Washington-based group, said in an interview. “But even more unhelpful is the fact that their economy is so fragile. The global economy is much weaker right now than we would like to see in terms of our ability to grow exports.”

European companies are already benefiting from the currency movements. Exports from Italy to the U.S. are up 10.2 percent this year through August compared with the first eight months of 2013, according to Commerce Department data released Oct. 3. German exports to the U.S. rose 10.7 percent, and French shipments climbed 6.5 percent.

The IMF on 7 Oct cut its outlook for global growth in 2015 to 3.8 percent from a July forecast of 4 percent. The U.S. will expand 3.1 percent next year, compared with 1.3 percent for the euro area and 0.8 percent for Japan. China is projected to grow 7.1 percent, its lowest since 1990, according to IMF data.

The greenback is appreciating as Federal Reserve policy makers project they will start raising interest rates next year from a record-low range of zero to 0.25 percent.

Regional Fed presidents including Atlanta’s Dennis Lockhart, New York’s William C. Dudley and Chicago’s Charles Evans have all said in the past month they are watching the dollar as officials debate the timing of the first interest-rate increase since 2006.