The downward spiral of the dollar versus the euro continues unabated.

From Euro News:

The euro has hit $1.60 for the first time ever. The new record high came after European Central Bank governing council members Christian Noyer and Yves Mersch warned of a possible interest rate rise saying policy makers will act if inflation does not slow. Since January 2002, when it was first issued as notes and coins, the single European currency has risen 80% against the dollar.

Policymakers around ECB President Jean-Claude Trichet have sounded increasingly hawkish. At its last meeting, earlier this month, the bank kept rates unchanged at 4%.

A weaker dollar means pricier oil and OPEC’s Secretary General Abdullah al-Badri said it was the currency situation and speculative trading that have caused the price surge, not a shortage of supplies from the producer nations: “I can tell you that other players on the market are causing the price to be on this level. I can tell you that because of the value of the dollar against other currencies … they go to oil, and not only to oil, they go to gold and other commodities.”

It is difficult to prognosticate when and where the slide level offs. The difficulty for me is that I do not know which policy implementations US officials have left at their disposal. The Federal Reserve has taken to cutting interest rates in the hopes of staving off a major recession in the United States. Clearly without tackling spending, the US will continue to borrow to finance its deficit and that drains resources from the global economy that would better spent on more important projects.