How Low Can the Euro Go?

[Wisconsin State Journal]

How Low Can the Euro Go?

Many economists think the 16-country currency is headed for a significant decline because of Europe’s government debt crisis.

Some are even predicting that by next year the euro will sink to what’s called parity against the U.S. dollar – euro equals $1, a level last seen in July 2002 and an 18% slide from $1.23 on May 28th.

Such a decline would take some of the shine off Europe’s vaunted project in the shared currency and it would cut Europeans’ purchasing power for imports. But if it happens gradually , the slide in the euor’s exchange rate could help exports and provide the boost Europe’s troubled economy needs. And since China and other Asian countries link their currency to the dollar, the euro would weaken in that direction as well and help trade with Asia.

All that would come as a relief to U.S. officials and investors, who have seen Europe’s troubles weigh on stocks and expectations for the world economy in the past several weeks.

Year-end forecasts for the euro range anywhere from $1.15 to $1.22.

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