Dollar vs Euro Essay Example

notes and coins in all member states, and the operation of the Eurozone payment sys- tems.

Do"ar vs Euro 3 Depreciating Dollar After the introduction of the euro, its exchange rate against other currencies fell heavily, especially against the U.S. dollar. At its introduction in 1999, the euro was traded at 1.18 US$/€, but by October 26, 2000, it had fallen to an all-time low of 0.8228 $/€. After the appearance of the coins and notes in 2002 and the replacement of all national currencies, the euro then began steadily appreciating, and reached parity with the U.S. dollar on July 15, 2002. Since December 2002, the euro has not fallen below parity with the U.S. dollar.

Since November 2003, it has remained above $1.15 and since August 2006 it did not fall under $1.25 but broke an all time high in July 2007 topping $1.38. To put this record high into perspective, $1.38 equates to an increase of only $0.20 from the euro’s initial trading price of $1.18, compared to the loss of about $0.35 when it hit its record low. A similar increase would result in an exchange rate of $1.53 for one euro. Later in 2007 the euro surpassed $1.40 in September, and in continuation of the euro’s rising the dollar fell in October below €0.70.

This continued fall of dollars value has much to do with his decreasing role as the world’s reserve currency as predicted by Alan Greenspan and many others, like Jim Rogers. Additionally, Jim Rogers declared that he quits dollar as he think its value will fall even further, especially against the Chinese yuan. Chinese officials signaled plans to diversify the nation’s $1.43

trillion reserves in response to a falling U.S. currency which also set the dollar under pressure. On 23 May 2003, the euro surpassed its initial ($1.18) trading value for the first time.

At the end of 2004, it reached a peak of $1.3668 (0.7316 €/$) as the U.S. dollar fell against all major currencies, fuelled by the so-called double deficit in the US accounts. But the dol- lar recovered in 2005, rising to $1.18 (0.85 €/$) in July 2005, and was stable throughout the second half of 2005. The steep increase in U.S. interest rates during 2005 had much to do with this trend. By early December 2006, the dollar had fallen below €0.75, hitting a low of 0.7495 €/$ (1.3340 $/€), slightly more than 3 cents above its record low, set in late 2004.

One of the reasons was an interest rate reduction by the Federal Reserve in September 18, 2007, that raised the euro’s value significantly and caused the dollar to fall below €0.70 one month later, marking a new record low. Economists like Alan Greenspan suggest that another reason for the continued fall of the dollar’s value is its decreasing role as the world’s re- serve currency. Chinese officials signaled plans to diversify the nation’s $1.43 trillion re- serves in response to a falling U.S. currency which also set the dollar under pressure. On November 7, 2007, the dollar fell to an all-time low at $1.4722 against the euro.