- Reaction score
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Take a look: €1 = $1.
With a war on the eurozone’s border, an uncertain energy supply from Russia and a growing risk of recession, the pressures bearing down on the euro finally grew so strong that on Wednesday it dipped to parity with the U.S. dollar — a one-to-one exchange rate.
It’s a sight unseen since December 2002, in the early years of the currency’s existence. The aesthetically pleasing round number has become a focal point for investors.
In foreign-exchange markets, “1.00 is probably the biggest psychological level around,” analysts at the Dutch bank ING said in a note to clients.
Even more remarkable than breaching this level is how quickly the euro has dropped against the dollar. The currency, shared by 19 European countries, has slumped more than 11 percent this year, as the dollar’s strength has been almost unmatched.
The euro’s sharp decline has come as the dollar, for generations one of the safest places to park money, has strengthened against almost every major currency in the world.
Currencies move like stocks, bonds or any other asset — investors can buy them directly when they think they will grow in value, and sell when they think they will decline. They also reflect global demand for a country’s assets in general, because buying U.S. government bonds or Apple stock requires getting dollars first, and lots of global trading takes place in dollars. So, as often happens in times of economic distress, people looking for a safe place to put their money have bought more dollars, at the expense of other currencies like the euro.
With a war on the eurozone’s border, an uncertain energy supply from Russia and a growing risk of recession, the pressures bearing down on the euro finally grew so strong that on Wednesday it dipped to parity with the U.S. dollar — a one-to-one exchange rate.
It’s a sight unseen since December 2002, in the early years of the currency’s existence. The aesthetically pleasing round number has become a focal point for investors.
In foreign-exchange markets, “1.00 is probably the biggest psychological level around,” analysts at the Dutch bank ING said in a note to clients.
Even more remarkable than breaching this level is how quickly the euro has dropped against the dollar. The currency, shared by 19 European countries, has slumped more than 11 percent this year, as the dollar’s strength has been almost unmatched.
The euro’s sharp decline has come as the dollar, for generations one of the safest places to park money, has strengthened against almost every major currency in the world.
Currencies move like stocks, bonds or any other asset — investors can buy them directly when they think they will grow in value, and sell when they think they will decline. They also reflect global demand for a country’s assets in general, because buying U.S. government bonds or Apple stock requires getting dollars first, and lots of global trading takes place in dollars. So, as often happens in times of economic distress, people looking for a safe place to put their money have bought more dollars, at the expense of other currencies like the euro.
Euro Falls to Equal the U.S. Dollar for the First Time in 20 Years
In recent months, pressure on the euro has been mounting while investors have been flocking to the U.S. dollar, a haven in times of economic upheaval.
www.nytimes.com