BERLIN – The euro hit a new all-time high against the U.S. dollar Friday, climbing on oil price worries and concern over the U.S. budget deficit.
The 12-nation currency reached $1.2940 in afternoon European trading, up from a high of $1.2878 on Thursday and surpassing its previous peak of $1.2927 set in February. The shared currency came into existence in 1999.
Oil prices which remain relatively high despite a more than 10 percent pullback in recent days have raised doubts about the strength of the U.S. economy, adding new concerns on top of high U.S. trade and budget deficits, factors that have weighed on the dollar for months.
On Friday, the euro briefly dropped below $1.28 after the Labor Department (search) reported that employers aggressively hired new workers in October, adding 337,000 people to their payrolls.
However, the rally "is a kind of self-fulfilling movement," said economist Dorothea Huttanus at DZ Bank in Frankfurt. She noted that, although the labor market figures were "outstanding," they only boosted the dollar for about an hour.
Huttanus cited "global skepticism about the U.S. economy because of oil prices" and persistent concern over the U.S. deficits.
She expects the euro will break through the $1.30 barrier "within the next week."
The stronger euro makes European exporters' goods more expensive compared to those of U.S. competitors. However, Chancellor Gerhard Schroeder (search) of Germany — whose economic recovery has been fueled by strong export growth — played down concerns over the currency's strength.
Schroeder told reporters at an EU summit (search) in Brussels, Belgium that he sees no reason for "serious concern," adding that the exchange rate "is not yet dramatic."
Commerzbank economist Ralph Solveen said he expected the dollar to regain some ground in the longer term "because interest rates in the United States are climbing more strongly than here."
The euro "will fall back toward $1.25," he told Deutsche Welle television.