NEW YORK — European and Turkish mills readying their spring 2006 collections for a slate of trade shows here this month are being affected in opposite ways by the fall of the dollar against the euro.
The Europeans have been hurt by a dollar that has lost almost 20 percent of its value during the last two years compared with the euro. This has made European textiles more expensive to U.S. buyers.
Turkish manufacturers, meanwhile, take the Asian approach to textiles and price their goods in dollars. Their strategy — bridging the gap between Europe and Asia by offering European styling and quality at Far Eastern prices — reflects their geopolitical position.
The currency dynamic isn’t expected to change anytime soon. On Monday, 1 euro was equivalent to about $1.31.
“The U.S. is running an enormous trade deficit and that’s going to keep downward pressure on the dollar,” said David Wyss, chief economist at Standard & Poor’s rating service. “Basically, Europe has to adjust to the fact that, if the U.S. eliminated its trade deficit, [the Europeans] would have to eliminate their trade surplus. It’s going to be a lot tougher for European manufacturing going forward.”
Part of the problem comes from the Chinese economic policy of pegging its currency, the yuan, to the dollar at a fixed rate.
“The whole burden of adjustment has been pushed onto the U.S.-Euro exchange rate,” said Wyss, who predicted that the dollar would lose another 10 percent of its value against the euro this year.
“The euro is killing the European mills,” said Charles Milgrom, a Toronto-based sales agent who represents European mills. “The trends are wonderful, the potential is huge, the customer reaction to the trends and paths that are being taken by the mills are very positive, but they’re not able to move because of the currency situation. It’s forcing people to buy and consider secondary resourcing in cases where they would normally run to Europe.”
Given the currency values, Milgrom said business for European mills has not been bad.
There are other challenges, though. In addition to Turkey, vendors are turning more to the Far East. The region, where China is the major player, has become even more of a threat since apparel and textile quotas were dropped among World Trade Organization members on Jan. 1.
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