European trade won’t collapse.

As the dollar started to decrease in value in 2002, some European ministers worried about Europe’s export, as it would become an advantage to import in Europe rather than to export.
The dollar kept losing value against the euro with no big consequences for European export due to the growing European economical strength. As the euro recently gained an unseen value against the dollar, European industrial export rose in Germany, Spain, France and Italy.

Loïc Steelandt

Source: http://www.nytimes.com/2008/03/19/business/worldbusiness/19euro.html?scp=15&sq=dollar%20euro&st=cse

Inflation softens the loss of the dollar.

In the last years the value of the dollar has made a spectacular fall compared to the euro’s value. In last year it has lost up to 18 percent against the euro. Nevertheless, some economists point out this is not an effective exchange rate, they rather the trade-weighted exchange rate, which measures a basket of currencies in both countries an compares them. From that point of view, the dollar has only lost 8.6 percent, which is less more dramatic, but it still indicates the decrease of value of the dollar against the euro.

Loïc Steelandt

Source: http://www.nytimes.com/2008/03/19/business/worldbusiness/19euro.html?scp=15&sq=dollar%20euro&st=cse

The FED hurts the dollar.

The current financial crisis started in the USA, and what seemed to be an ironical evolution has now reversed. Initially the dollar, who was losing value against the euro since 2002, rose from its fall due to the crisis. But even that positive evolution won’t survive the crisis. One day after de Federal Reserve lowered the interests to near zero, the dollar lost 4 cents to the euro, which is the largest single-day jump since the euro’s birth in 1999. This collapse of the dollar was much bigger than expected.

Loïc Steelandt

source: http://www.nytimes.com/2008/12/18/business/worldbusiness/18euro.html?scp=1&sq=dollar%20euro&st=cse

Dollar tumbles against euro

Since 2002, the American dollar has been decreasing in value against the euro, reaching a peak in devaluation in 2008.
In May 2008, a lot of Europeans were enjoying their cheap American vacations, this as a result of the euro raising above $1.60 for the first time ever.
The last few months, as the global financial crisis broke out, the dollar was finally gaining value against the euro. This trend would have continued, if it weren’t for the Fed lowering its interest rates, causing the euro to jump once again to a height of $1.43 today.

http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/dollar/index.html?scp=1-spot&sq=dollar&st=cse

Jasper Soete

Tumbling rates

Europe’s central banks make drastic cuts in interest rates to ward off a recession. Three European central banks cut interest rates. The Swedish central bank announced a reduction of 1.25%. The Britain’s central bank carries through a reduction of 1%. As last, the European Central Bank reduces the benchmark rate by 0.75%. The central banks make this dicision to offer an answer to the threatening recession. By cutting interest-rates they want to boost the economic activity. The big rate cuts brings relief as European centrals banks ride to the rescue. But it shows also the earnestness of the situation.

Vincent Tavernier

http://www.economist.com/world/britain/displaystory.cfm?story_id=12719463

Emerge from the doldrums

The dollar is improving it’s exchange rate position after a long period of recession.
The rally of the dollar ows to the stagnating economies in the rest of the world.
Other economies are the victim of the financial troubles triggered in the US. Now, the dollar is taking advantage. The currency also gets profit of the falling oil prices and interest rates will head forward. The fear of a dollar rout, which has long stalked financial markets, now seems to have lied down.

Vincent Tavernier

http://www.economist.com/world/britain/displaystory.cfm?story_id=12719463

Fed goes to zero interest rates

The Federal Reserve has announced that it will lower its benchmark short-term interest rate to somewhere between 0 and 0.25%. The lowest ever recorded. With this initiative, the Fed wants to preserve price stability and promote the resumption of sustainable economic growth. Falling consumer spending and increasing unemployment should be put to halt.
Since currency values and interest rates go hand in hand, the Fed’s decision to lower the interest rates also has its downside. Investors get better returns on their cash in countries with higher interest rates, such as the European countries where the benchmark rate is at 2,5%. This may cause a potential drain on the dollar…

http://www.economist.com/finance/displaystory.cfm?story_id=12818300

Jasper Soete