Exports from the Euro-zone declined 0.77% in November, bringing the level of exports 4.48% below a year ago. The trend in exports has been negative since early 2002 when the euro began its rise but the extent of the decline has so far been moderate. It was not until November 18th, that euro exceeded 1.1812 to the dollar, the value at which it was launched on January 4, 1999. Through November, increased demand for Euro-zone goods from the U. S. and Japan has overcome some of the price effects of the higher Euro.

However, the euro has continued its climb and in December alone, increased 5%. When the euro reached 1.2853 vs. the dollar on January 9, 2004, the president of the ECB (European Central Bank), Jean-Claude Trichet, and Chief Economist, Otmar Issing, issued warnings that the continued rise in the exchange rate could sabotage the incipient economic recovery. A week later, the euro was down to 1.2395 vs. the dollar.

Any further significant declines in the euro are dependent not only on actions the ECB might take, but also on the willingness of China and other Pacific Rim countries to appreciate their currencies.The Japanese Yen has appreciated 12% since June 30, 2003, but most other Pacific Rim countries have kept their currencies pegged to the dollar.