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Dollar hits 4 year low versus euro
LONDON, England (CNN) -- The dollar fell to $1.10 against the euro for the first time in four years Wednesday after U.S. Treasury Secretary John Snow cast doubt on Washington's strong dollar policy. Snow told journalists in Washington Tuesday he was "not particularly concerned" about a weak dollar. Attempts by the U.S. Treasury to halt the decline was short-lived as European trading began Wednesday morning. The Treasury said Snow still favored the strong dollar and "the secretary's position has not changed." The dollar dropped to a low of $1.1003 -- its weakest level since March 1999, before recovering to $1.0974 in midday London trading Wednesday. "The dollar is going to stay on the back foot,'' David Mann, currency strategist at Standard Chartered, told Reuters. "I don't think Snow really meant to imply the strong dollar policy has gone, which is why we haven't seen an even bigger move, but the euro is already having a significant run as we wait for some resolution to the Iraq situation.'' Currency watchers are concerned a strong euro could undermine the 12-nation euro zone's attempt to beat weak economic growth. The European Central Bank could be forced to cut interest rates Thursday as exporters find it difficult to compete overseas. (Full story) A point underlined by German Economy Minister Wolfgang Clement who said a euro above $1.10 may damage the country's export industry. "We remain on the countdown to an ECB rate cut at Thursday's council meeting with calls for a half point cut, just holding a slight lead over the quarter point contingent," economists at Bear Stearns wrote in a note to investors. "We remain adamant that weak growth fundamentals, falling inflation and the strong euro above U.S.$1.09 will win the day for the bigger cut. After all, the ECB has already implied that half measures would hardly be worth it in the present environment, warranting the need for a more aggressive rate reaction," the bank added. "The euro is over U.S.$1.10 for the first time in four years. By the end of this year it should be at $1.15, with $1.20 to follow next year. The only 'interruption' to this uptrend could come in the wake of any military victory in Iraq, as the dollar is likely to mimic the recovery in stocks, and push on towards parity against the euro." The dollar has lost a fifth of its value against the euro over the last 12 months but has been punished in recent weeks on worries about a possible war with Iraq.
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