Weak euro raises currency bar for U.S. exporters

Weak euro raises currency bar for U.S. exporters

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SAN FRANCISCO (MarketWatch) -- A slumping euro, while great news for tourists on their way to Europe, is creating headaches for U.S. manufacturers whose overseas sales take a dip every time the currency drops a notch.

"Anytime you look at currency fluctuations there are a lot of moving parts, but for U.S. manufacturers the strengthening of the dollar [relative to the euro] will have a negative impact," said Adam Fleck, an equity analyst with Morningstar.

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U.S. companies are facing a decline in their European sales by the second half of this year when the weaker euro is exchanged for dollars. It will also drive up costs for raw materials shipped to the region and purchased in the local currency.

And in foreign markets where both U.S. and European makers of heavy machinery and consumer products compete, the weaker euro could give Europeans a chance to drop their prices, undercutting American rivals and grabbing market share.

The Euro has too strong in comparison to the Dollar for many years and although the current depreciation of the Euro is for many reasons not desirable, but it would not be all bad. US companies have enjoyed a major competitive advantages over their European counterparts for the past years and with the decline of the Euro, this advantage fades, hence strengthening the competitive position of European companies, which is likely to stimulate exports and therefore, could contribute to help dealing with the economic woes in the Eurozone.

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