The value of the dollar against the euro is $1.28. This is of course always subject to change. But the uncertain economic situation has made it even more difficult to determine where the currencies are headed.
Issues Affecting the Euro
The issues that affect the euro are mostly those that concern the European continent. In particular the currency gains or loses ground based on economic data released. The situation in the euro zone is monitored closely.
If the economic data suggests it will get stronger, the value of the dollar against the euro will go down. If the downturn in Europe continues, investors will ship their assets into dollars instead.
Budget and Other Financial Issues
Another issue that affects the euro is the budget of a major country. A budget shortfall has adverse effects for the euro. A wide gap means a country has to borrow more money.
This can be seen again in the case of Germany. Economic data shows it must borrow over $140 billion. There are other countries in the euro zone, but Germany is the focal point.
Simply put, if Germany has problems the whole continent is likely to suffer. Part of the trouble with the country is that it’s export dependent.
Due to the economic downturn in the United States, demand for its products (like cars) has slowed down. This has had a huge effect on the value of the dollar against the euro. It has resulted in job losses and company closures.
Another issue that affects the value is the refinancing program of the European Central Bank (ECB). This program is aimed at helping stabilize banks. Although it can help finance institutions lend, it has negative effects on the euro. Of course, the situation in the United States is also a huge factor.
Issues Affecting the US Dollar
In the past the exchange rate between the two currencies was mostly 1:1. However analysts have long warned of the dollar’s decline against the euro. For several years the US has been plagued by extensive borrowing. In addition the account deficit was huge.
What held the value of the dollar against the euro up was consumer spending. But as the credit crunch worsened, this confidence slumped. As the credit crunch and housing crisis boiled over, confidence in the dollar plunged.
Because it’s the world’s reserve currency, weak dollar affects other countries. As the greenback weakens, their native currency becomes strong. For export driven countries, this is disaster. This is best exemplified in Japan and Singapore.
China has recently suggested that talks for a new global currency reserve be brought up in world economic forum discussions. This isn’t something that will take place in the near future. Too many countries have vast dollar reserves. Nevertheless the fact that it’s being brought up shows the extent of the greenback’s weakness.
It is impossible to predict the future value of the dollar against the euro. But with the economic situation still uncertain, its worth is likely to fluctuate.