Since 2002, the value of the dollar has been decreasing. The value of the dollar has been paling in comparison to the nearly consistent euro. This has spurred caution and alarm in the foreign market because the dollar is perceived to be the safest currency to trade (The New York Times).
However, recent developments make an investor think twice about focusing all its investments on the dollar since there has been continued plumbing of the dollar in the market, which has cause prices of oil and gold to skyrocket, even on record high in history.
Before the discussion as to the exchange rate between the dollar and euro is touched, it is important to first determine such concept.
The euro to dollar exchange rate is described as the price to which the world demand for U.S. dollars equals the world supply Euros (easy-forex). Irrespective of geographical origin, a rise in the world demand for euros leads to an appreciation of the euro.
[...] Moreover, the International Herald Tribune noted that: The impact of the falling dollar is rippling through the world and American economies in numerous ways. It will give an edge to American manufacturers and has already helped lift exports by more than 11 percent in the first eight months of the year. Businesses with large foreign operations can expect a lift in profits when they convert their overseas earnings into dollars (International Herald Tribune). On the other hand, there are groups that would say that the diminishing value of the dollar is bad because it leads to inflation in the United States (ABC News). [...]
[...] The decrease of the dollar value has encouraged the U.S. to actively compete in the international market since the costs of commodities have been reduced. Moreover, governments have not entirely abandoned the dollar because it has maintained its reserve of dollars in order to suppress the value of their own currencies (The New York Times). Works Cited Easy-Forex. "Dollar-euro currency exchange." Easy-forex.com Apr 2008 < http: forex.com>. "Euro Falls Against Dollar, Yen on Surprise Retail Sales Decline Bloomberg Television April 2008. [...]
[...] It was reported that the spread between the interest rate at the European Central Bank (home of the euro) and the Federal Reserve (home of the dollar) is larger and that has weakened the value of the dollar against the euro (ABC News). It is presumed that better interest rates are promising if one is holding a euro than a dollar (ABC News). Another factor is that central banks around the world have been diversifying their holdings away from dollars to euros, British pounds and so on (ABC News). [...]
[...] It says the dollar was little changed against the euro on Thursday, trading just above an all-time low, as concerns about the U.S. housing market and its impact on consumers continued to sour investors on the greenback (Reuters). Possibility of a Dollar Crisis On March the New York Times published an article about the plummeting dollar. It was reported that the dollar has been declining in value against the euro and several other currencies since 2002, slamming travellers to Europe and American consumers purchasing European goods (The New York Times). [...]
[...] According to the report, the Euro fell against the Dollar and the Yen after retail sales unexpectedly dropped and Bayerische Landesbank reported 4.3 billion euros 6.7 billion) in write downs from the collapse of the subprime-mortgage market (Bloomberg). The report further states that the euro weakened versus all of the most-actively traded currencies after a European Union report showed retail sales declined 0.5 percent in February, pointing to a slowdown in the region and adding to pressure for interest- rate cuts. [...]
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