Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Dollar Strength May Undermine Obama’s Export Goal, Mizuho Says

July 2 (Bloomberg) -- President Barack Obama’s goal of doubling U.S. exports in five years may fail as the dollar surges against the euro and China acts to avoid rapid gains for the yuan, Mizuho Corporate Bank Ltd. said.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, climbed almost 9 percent this year as Europe’s financial crisis boosted demand for the refuge of U.S. Treasuries. The flight to safety may continue, strengthening the dollar to a more-than-seven-year high of $1.05 per euro in the third quarter of 2011, said Daisuke Karakama, a market economist in Tokyo at Mizuho.

“The U.S. government’s wholehearted desire is probably to raise export growth and employment” before midterm elections in November, Karakama said. However, the dollar will strengthen against the euro as “austerity measures due to the European crisis depress the region’s economic growth and keep interest rates there low.”

Obama’s export goal, outlined in his State of the Union address this year, also faces challenges because China is likely to limit gains in the yuan against the dollar at an annual rate of about 3 percent, according to Karakama. Obama this week reiterated his desire for a stronger yuan, days after citing “headwinds” from the European crisis.

China’s central bank has allowed the currency to gain 0.8 percent since saying on June 19 that it was resuming a flexible exchange rate to curb inflation and rebalance the economy away from exports. The currency is allowed to trade 0.5 percent on either side of the daily fixing.

“The U.S. won’t be able to make a breakthrough toward a weaker dollar,” Karakama said.

The euro fell to $1.1877 on June 7, the weakest since March 2006. It traded at $1.2490 at 2:58 p.m. in Tokyo, from $1.2527 yesterday.

To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net; Nate Hosoda in Tokyo at nhosoda @bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.