18 May 2010 21:48 [Source: ICIS news]
HOUSTON (ICIS news)--The euro's fall to a four-year low on Tuesday could help European producers increase exports to Asia, a consultant said on Tuesday.
The euro weakened to $1.22 - or €0.82 - versus the US dollar.
The weaker euro could make European exports more competitive in China, South Korea and Taiwan, said Bob Bauman, director of US-based Polymer Consulting International.
For US and eurozone trade, however, the weakening currency still could not offset the advantage that North American producers enjoy as a result of their use of lighter feedstocks, Bauman said.
"Personally, I don't see it affecting US trade too much," he said.
Kevin Swift, chief economist of the American Chemistry Council (ACC), said changes in currency exchange rates typically take months to take effect.
In the past, it took six to nine months for changes in exchange rates to affect trade patterns, Swift said. In recent years, that lag time has increased, he said.
The euro was weakening because of worries about the debt crisis in Greece.
The concern was that the crisis could spread from Greece to other eurozone countries, such as Ireland, Italy, Portugal and Spain, Swift said. In addition, there was growing concern about the exposure that German banks had to those nations.
Many now expect the euro and dollar exchange rate would be about $1.25 for the year, down from earlier estimates of $1.30, Swift said.
If the debt crisis grew large enough, it could become a financial crisis, restricting access to credit, Swift said. "Is this 2008 all over again?" he asked.
As credit disappeared, companies cut spending to preserve cash, setting off a deflationary spiral.
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