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		Home Page Mortgage News You Can Use Bundesbank Says Dollar Drop Against Euro Hasn't Hurt Europe Growth So Far Feb. 16 (Bloomberg) -- The Bundesbank said the dollar's decline against the euro hasn't yet hurt economic growth across the dozen nations using the currency, though risks of ``abrupt'' currency shifts remain. ``The dollar's considerable drop against major currencies has so far barely disturbed the recovery,'' the central bank said in its monthly report. Still, ``there are risks of disproportionate or abrupt exchange rate shifts due to global imbalances.'' Germany's economy, Europe's largest, is recovering from a recession last year as a global recovery led by the U.S. and Asia outweighs the euro's 16 percent appreciation against the dollar in the past five months. The Bundesbank said today that global growth may be stronger than economists had forecast. The bank's assessment is in line with that of the European Central Bank, which expects the recovery to continue despite the stronger euro. ECB President Jean-Claude Trichet, who has spoken out against ``brutal moves'' in exchange rates, may elaborate on the ECB's exchange rate policy when he addresses the European Parliament in Brussels at 3 p.m. today. Clouded Prospects Some strategists say Europe's recovery prospects may be clouded by a further appreciation of the euro. Deutsche Bank AG, the third-biggest dealer in the currency market and most accurate forecaster in the fourth quarter, says the euro will rise to $1.35 at year-end. The currency bought $1.2749 at 12:52 p.m. in Frankfurt, close to last month's record of $1.2899. Germany's Ifo institute said today that a further euro appreciation would pose ``a major obstacle'' to a recovery. The German central bank conceded that the U.S. trade deficit may accelerate the euro's climb. The dollar is declining as investors question the U.S.'s ability to finance its growing deficit, which rose to $42.5 billion in December. The Bundesbank's assessment of the euro's impact on growth conflicts with some corporate statements, which suggest European companies aren't benefiting fully from a global recovery. ThyssenKrupp AG, Germany's biggest steelmaker, last week said fiscal first-quarter sales were held by back the dollar. Volkswagen AG has said the stronger euro will hurt its performance in the U.S. this year. Overstated Importance For now, the Bundesbank is suggesting the importance of the euro's exchange rate against the dollar may be overstated by market participants and economists. ``When assessing currency developments and their impact on the euro region's economy, it needs to be remembered that the euro's trade-weighted exchange rate has climbed a lot less than its bilateral exchange rate against the dollar,'' the bank said. The euro's effective exchange rate, which is calculated by the ECB and tracks the currency's value against a basket of the region's 12 major trading partners, has climbed 8 percent since September. The Bundesbank said that a further 10 percent appreciation of the euro's effective rate would wipe as much as 0.75 of a percentage point from economic growth in the current year and as much as 1.5 percentage points within three years. The central bank said it doesn't anticipate such a shift in the euro's rate. The central bank also pointed to the advantages of a stronger currency, saying that the euro's appreciation cuts import prices and benefits companies whose business is focused on the domestic German economy. Lower import prices also slows inflation, making it easier for the ECB to keep rates at the lowest level in more than half a century, the Bundesbank said. ``The euro's appreciation improves the euro region's terms of trade, which reduces cost and price pressure in the currency region and, along with a number of other factors, makes low central bank interest rates possible,'' the bank reported.   Back to Original Article: News You Can Use   Continue with: Slower Income Growth Offsets Employment Gains Dollar Steady; Asian Stock Rise Slows Dollar Steady; Asian Stock Rise Slows part two Gasoline prices inch upward This week in business Tax Guide 2004 Filling Out the 1040 Starting Planning, Now Tax Planning Is Not Just for April Taming the Paper Tiger Income Tax Software Eases Annual Filing to IRS Online Tax Tools Web Sites Offer Income Tax Advice and Assistance Uncle Sam Watching the Web Internet Taxes Considered, Again Tips to Get Started on 2003 Tax Returns Minimum Tax Causing Taxpayer Headaches Investment Costs Can Mean Tax Breaks Democrats Assail Bush Budget Plans, Tax Cuts Congress to Table Permanent Tax Cuts IRS Employees Targeted in Tax Review Few Tax Changes Expected for Small Biz
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