The last time a euro was worth as much as a dollar was at the end of 2002. This phenomenon, when two coins are worth the same thing, is also called parity.
The European currency has been under pressure for some time due to the growing risk of economic catastrophe in the euro zone, writes the Bloomberg news agency† Investors fear that the European Central Bank (ECB) is more cautious about raising interest rates in the euro zone.
Rising interest rates
The ECB has indicated it will raise interest rates by 0.25 percentage points later this month fight against high inflation† This is a small step from the actions taken by the US central bank. And it also pushes up the dollar exchange rate.
In the United States, interest rates are rising at a much faster rate than in Europe. In mid-June, the Federal Reserve raised interest rates by 0.75 percentage points. Because US Treasuries offer higher returns to investors through higher interest rates, dollars are in high demand to be able to purchase them. This pushes the exchange rate of the US currency upwards, which leads to this development.
A strong dollar is bad news for vacationers traveling to the United States. At the beginning of this year you had to exchange 90 euros for a pair of jeans from a certain American brand at 100 dollars, now you have lost 100 euros.
For Americans, it is actually becoming cheaper to buy euros to vacation in Europe.
And it’s also good news for companies that do a lot of business with the United States. Americans who want to buy European products actually have to pay less. And that will likely drive up demand. And when the dollars received are exchanged, the entrepreneur receives more euros in return than was the case in the last twenty years.
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