European exporters jittery over euro strength

> But analysts see little risk to growth

PARIS: Some European exporters are beginning to worry about the strengthening euro which has rebounded from near parity with the dollar after Donald Trump’s election, though analysts see little immediate risk to growth.

Europe’s single currency surged last Wednesday to US$1.1910 (RM5.10), its highest level since early January 2015, before retreating to US$1.1770 late Friday.

For European businesses heavily reliant on exports, especially in Italy and France, the strong euro could hurt the bottom line.

“There’s a general nervousness that this strong euro is beginning to impact European corporate profits – we are starting to see it in this quarter’s results,” William Hamlyn, investment analyst at Manulife Asset Management, told AFP.

Still many analysts say economic fundamentals are in favour of the euro, compared to the weak dollar and the feeble pound which has been hammered ever since Britain voted last year to exit the European Union.

And the impact of a strong euro is different depending on the country. Germany, Europe’s biggest economy, has nothing to fear for the moment, said Berenberg Bank economist Holger Schmieding, noting the euro is still far from its long term equilibrium rate of US$1.25.

Only about a quarter of German exports are pegged to the dollar, said Ilja Nothnagel, International expert at the German chambers of commerce DIHK.

Italy would be the country “most affected by the increase in value of the euro”, said Ludovic Subran, chief economist at trade credit-insurer Euler Hermes.

“If the dollar/euro rate should remain stable at this level, we will be at a disadvantage,” admitted Licia Mattioli, vice-president for international affairs at the Italian employers’ organisation Confindustria.

“The effect would be crosswise on our exports, which have grown the past few years towards America. We are exporters to the United States in a number of sectors: fashion, accessories, jewels, food , automobiles, machinery...,” she said. – AFP