Thursday

21st Jun 2018

Euro hits all-time high

  • The euro has reached a new record (Photo: EUobserver)

The euro has again reached a new all-time high against the dollar, reflecting mounting fears over the health of the US economy.

In the past weeks, the European currency soared from record to record. At its highest point yesterday, one euro bought 1.4130 dollars, breaching the earlier record of Friday of $1.4120.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... our join as a group

Nevertheless, the dollar is still above the all-time low against the German mark in 1995, equivalent to nearly $1.46 for one euro.

The rejuvenated euro stands in stark contrast with the all-time low of 0.8252 in October 2000.

The gradual weakening of the dollar, rooted in the continuing existence of an American budget and trade deficit, the so-called "double deficit", began in 2003.

Recently, pessimism about the US economy, exacerbated by the housing crisis and the subsequent interest rate cut by the US Federal Reserve last week pushed the dollar further down.

Forecasts of slowing US growth have increased speculation of additional interest rate trimming, making the dollar even less attractive to invest in.

Moreover, in Europe, the 13-member eurozone economy is showing strong growth, which has led some to speculate that the currency zone has finally shaken off its persistent economic woes, driving currency strength.

The economic impact is ambiguous

The economic impact of the changing exchange rate is ambiguous. On the one hand, European consumers and companies can buy goods more cheaply, which stimulates consumption and curbs inflation. In particular, the offsetting effect on the high dollar-denominated oil prices is considered beneficial.

On the other hand, European exporting companies feel the pinch as they increasingly experience difficulties in selling their – now more expensive – goods overseas.

Fabrice Bregier of Airbus, the pan-European aircraft manufacturer, told French radio station BMF that the high dollar-euro rate means that the company has to cut costs by up to two billion euro to remain competitive.

An increasing number of industries face similar hardships, prompting calls to lower interest rates in order to give exporting companies a level playing field – echoing a call made by French president Nicolas Sarkozy.

It remains to be seen whether the European Central Bank, known for its independent and inflation-driven decision-making, will see the need to slash interest rates.

Chinese 'currency swap' would further strengthen euro

If China was to gradually replace its dollar reserves with other currencies such as the euro, a further rise of the common European currency against the dollar will take place, experts warn.

Greek bailout exit takes shape

At a meeting next week, eurozone finance ministers and the IMF are expected to agree on new cash, debt relief measures, and a monitoring mechanism to ensure that Greece can live without international aid for the first time since 2010.

Analysis

Beyond US dispute, EU still aiming at China

On the day it outlined its reaction to US tariffs on steel and aluminium, the EU commission also launched a case against China on property rights - an issue on which EU and US are working hand-in-hand.

Opinion

The risks behind the 'green bond' boom

The EU should not overuse the financial system in order to achieve environmental goals, or it risks the emergence of a green bond bubble which would be detrimental to the financial sector and hinder the achievement of climate targets.

Opinion

Eurozone needs institutional reform

Both the examples of Greece and Italy test the limits of a system with inherent weaknesses that feeds internal gaps, strengthens deficits and debts in the European South, and surpluses in the European North respectively.

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. Macedonian Human Rights MovementMHRMI Launches Lawsuits Against Individuals and Countries Involved in Changing Macedonia's Name
  3. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  4. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  5. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  6. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  7. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  8. Mission of China to the EUChina: Work Together for a Better Globalisation
  9. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  10. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  11. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  12. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network

Join EUobserver

Support quality EU news

Join us