Fears of euro zone countries’ debt problems causing them to default have pushed the euro to a four year low against the dollar and down significantly against other currencies including China’s yuan.
However there are positives and the Organisation for Economic Co-operation and Development has said the weaker euro should help the region’s growth by lifting exports.
The OECD’s Chief Economist Pier Carlo Padoan said: “The global economy needs some rebalancing in exchange rates, not just the euro which has been overvalued for some time in the past, but also of course the Chinese currency, which has been undervalued for some time and it still is.”
The euro’s dip in value is however an obstacle to the Obama administration’s aim of doubling US exports by the end of the current presidential term.
China has said that the weaker euro means its exports to Europe will suffer and so it has delayed a decision on letting the yuan rise in value against the dollar.
Top US officials, including Treasury Secretary Timothy Geithner, failed to get a pledge on the yuan’s revaluation at this week’s Strategic and Economic Dialogue in Beijing
Economists expect the Chinese government to take at least another three months to figure out the impact of the European debt crisis on its exports and only then will it decide on the yuan.