Bad luck for US travelers: A dollar now costs a euro

The last time one euro was equal to one dollar was at the end of 2002. This phenomenon, when two currencies have the same value, is also called parity.

The European currency has been under pressure for some time due to the growing risk of an economic disaster in the Eurozone. Bloomberg news agency writes† Investors fear the European Central Bank (ECB) will be more cautious about raising interest rates in the euro zone.

Interest rate hike

The ECB has indicated it will raise interest rates by 0.25 percent later this month to combat high inflation. This is a small step compared to the actions taken by the US Federal Reserve. That also pushes up the dollar exchange rate.

In the US, interest rates are rising much faster than in Europe. In mid-June, the Federal Reserve raised interest rates by 0.75 percent. As U.S. Treasuries offer higher returns to investors thanks to higher interest rates, there is more demand for dollars to buy them. This pushes the exchange rate of the US currency upwards, resulting in this growth.

A strong dollar is bad news for vacationers heading to the US. Earlier this year, a pair of jeans from a certain American brand had to exchange 90 euros for 100 dollars, and now you have lost 100 euros.

For Americans, buying euros to vacation in Europe is actually getting cheaper.

Favorable for export

And it’s also good news for companies that do a lot of business with the US. Americans who want to buy European goods actually have to pay fewer dollars. And this will increase the demand. And when the dollars received are exchanged, the businessman receives more euros in return than he has in the last twenty years.