NEW YORK – The U.S. dollar slid to yet another new low Tuesday against the euro (search), which rose above $1.31 for the first time after a weekend meeting of the world's top finance officials failed to send any signal of forthcoming action to stop the dollar's slide.
The European currency rose as high as $1.3105 in afternoon trading in Europe before dropping back below $1.31 and broke the previous record of $1.3074 set last Thursday.
The dollar rose to 103.42 yen from 103.15 yen late Monday and up from the day's low of 102.89 yen. The dollar has been trading at four-and-a-half years lows against the yen in recent days.
The 12-nation European currency has risen from about $1.20 about two months ago, prompting European leaders to worry openly that the continued rise of the euro might damage their fragile export-driven recovery. While a weak dollar helps U.S. exporters, it can make items like German sports cars or French wines more expensive or lower profit margins for their manufacturers.
Introduced in 1999 as the common currency for Germany, France and 10 other European countries, the euro initially dropped against the dollar but has risen by nearly 60 percent since hitting an all-time low of 82 U.S. cents in October 2000.
Still, finance officials from the Group of 20 (search) industrial and developing countries finished their weekend meeting in Berlin without any signal of concerted action, issuing a statement that made no specific mention of the dollar.
The currency remained stable Monday as traders treated the outcome of the meeting cautiously, but started becoming more aggressive on Tuesday, said HSBC economist David Bloom in London.
Otherwise, no specific event drove the dollar to the new record, he said.
"The dollar's trading very badly — it's like pushing a basketball underwater," Bloom said. "You push it down with your hands and say 'look, it's going down,' — then it shoots up in your face."
Concern over the U.S. trade and budget deficits has been a major factor in the dollar's decline, and U.S. Treasury Secretary John Snow said Sunday he stressed to his counterparts at the G-20 meeting that "the United States is dealing with its deficit."
The meeting's outcome shows world leaders are in no rush to intervene to slow the euro's rally, Bloom said.
He said he expects the euro to be trading at $1.35 within three months — and after that, the European Central Bank might try to take action
"If they are to intervene, they need to get to a level where it's massively overstretched, but we're not there," Bloom said.