Thursday

29th Sep 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

New EU rules on financial products in limbo

A feud between MEPs and the EU commission is threatening to derail financial services regulation that would protect consumers from misleading investment products.

Stakeholders' Highlights

  1. Counter BalanceWhy the Investment Plan for Europe Does not Drive the Sustainable Energy Transition
  2. Nordic Council of MinistersThe Nordic Region Seeks to Make Its Voice Heard in the World
  3. Taipei EU OfficeCountries Voice Support for Taiwan's Participation in ICAO
  4. World VisionNew Tool Measuring Government Efforts to Protect Children Released
  5. GoogleDid You Know Europe's Largest Dinosaur Gallery Is in Brussels? Check It Out Now
  6. IPHRHuman Rights in Uzbekistan After Karimov - Joint Statement
  7. CISPECloud Infrastructure Providers Unveil Data Protection Code of Conduct
  8. EFAMessages of Hope From the Basque Country and Galicia
  9. Access NowDigital Rights Heroes and Villains. See Who Protects Your Rights, Who Wants to Take Them Away
  10. EJCAppalled by Recommendation to Remove Hamas From EU Terrorism Watch List
  11. GoogleBringing Education to Refugees in Lebanon With the Clooney Foundation for Justice
  12. Belgrade Security ForumCan Democracy Survive Global Disorder?