Euro Dollar Money Exchange Rate: Foreign Currency, Policy, Value And Investing Options
The Euro dollar money exchange rate is the official currency of the European Union. The Euro became an accounting currency in 1999 and was physically circulated as currency in early 2002. The currency was mandated by the 1992 Maastricht treaty which was established to form an economic and monetary union. Member nations were required to meet strict economic criteria in order to be admitted including a low inflation, interest rates close to the EU average, a budget deficit less than 3 per cent and a debt ratio of less than 60 per cent of GDP. Member nations that pegged their currency to the currency exchange rate of the Euro include: Austria, Belgium, Holland, Finland, France, Germany, Ireland, Italy, Luxembourg, Portugal and Spain. Additional member nations who have since joined the union include Greece, Slovakia, Cyprus and Malta.
The Euro is centrally administered by the European Central Bank (ECB) comprised of the central banks of the Euro zone countries. Monetary policy directions such as interest rates can impact the Euro dollar foreign currency exchange rate. Other factors such as fiscal policy and oil pricing also impacts this. In the past, the US dollar has enjoyed artificially high demand due to the fact that oil is priced in US dollars. This is starting to change with countries such as Iran started to accept payment for oil in other non-US denominated assets such as the Euro. Gulf States such as Saudi Arabia and other oil producing nations have also had discussions about moving away from accepting US dollars.
The current decline of the exchange rate of the US to Euro dollars is a direct result of the current prevailing US economic conditions. With the Federal Reserve Bank adopting an aggressive stance to monetary policy, a reduction in interest rates has resulted in the currency exchange rate of the Euro reaching all time highs. This is goods news for European travelers looking to travel abroad. The rise of the Euro USD rate makes travel considerably cheaper. In fact, some shops in New York are staring to accept the Euro as payment for goods or services. The favorable Euro to USD exchange rate is an incentive to take payment in an appreciating currency.
What Is the Future of the Euro to Dollar rate?
The US deferral reserve has made no effort to hide the fact that it is currently following a policy of currency debasement. Faced with fiscal problems from the sub prime fallout, the current trend for US interest rates is down. If further rates cuts are forthcoming, this will see the USD Euro exchange rate continue to move in favor of the European Union. This possibility has also prompted discussion about a worldwide coordinated central bank effort to support the US dollar. There are many vested interests from countries that have large US dollar holdings that do not want to see the value of their holdings continue to erode. This remains a possibility as does the eventual reversal of the current US interest rate trend. If inflation starts to be given more attention, a rise in US interest rates could signal a reversal from the current US dollar decline.
Protecting your US dollars.
Investors who want exposure to the favorable foreign exchange rate of the Euro dollar can consider purchasing shares in the Currencyshares Euro Trust (Symbol: FXE) or depositing funds in the Euro CD (www.everbank.com). Investors in the EURO CD earn an interest rate for funds on deposit and also get to enjoy profits from any appreciation in the Euro relative to the US dollar.
