Euro Tumbles Against Dollar on Outlook for U.S. Economy

The euro had its biggest decline against the dollar in more than three months on Monday as traders bet the European economy’s growth rate will lag growth in the United States.

The euro slumped to $1.133 in New York from $1.149 in European trading on Friday. The euro now is at its lowest level since May 5, after rising as high as $1.19 in late May.

German Finance Minister Hans Eichel’s forecast for that nation’s economy to grow 2% next year is “much too optimistic,” Bundesbank board member Hans Reckers told German newspaper Welt am Sonntag in an interview published on Sunday. Growth of “1% or 1.5% at the most is realistic,” Reckers said.

European Union Monetary Commissioner Pedro Solbes may reduce his 2003 forecast for growth in the euro region to 0.7% from 1%, spokesman Gerassimos Thomas said Monday.

By contrast, U.S. Treasury Secretary John W. Snow has said he expects the U.S economy to expand at an annual rate of “well over 3%” in the second half.

A currency generally reflects the strength of the underlying economy. The euro had gained early this year as some traders bet the euro-zone economy might perform better than the U.S. But those hopes have faded.

A weaker euro, however, would help European manufacturers by making their exports less expensive abroad. The flip side is that a rebounding dollar could put new pressure on sales and earnings of U.S. exporters.