4/14/2005

Euro's Strength To The Dollar

Has anyone else noticed that the dollar has just been getting its’ butt kicked when compared to most currencies, particularly the euro. Why is this? What have the Europeans done that is making their currency gain value so much. The dollar has lost about 20 percent of its value against the euro in the last two years. The euro is continually catching up to the pound too; maybe in a few years, it will hold the same value. Members of the Bush administration say the threat of a financial crisis is not a concern. But is there one?

3 comments:

Diane said...

I think the trade deficit plays a large part in the decrease of the dollar's value. The U.S. needs to develop a plan to increase exports. The of exports to imports needs to become more balanced.

Ralph said...

The weak dollar has its disadvantages but it also has benefits. With a weak dollar, foreign countries can buy more of a US product. This raises demand for U.S. goods, and revenue will rise for the U.S. companies. Two years of a weak dollar is a long time, maybe there should be some concern. I know currencies increase and decrease everyday; like stock, we should pay attention to the long term picture.

Dr. Tufte said...

I'm a macroeconomist, and even I don't pay much attention to exchange rates.

I wouldn't worry about this. It indicates relative weakening of the U.S. economy relative to Europe. This isn't so much that we are doing badly as they are doing better.

There are also some indications that while the Federal Reserve is tightening monetary policy by raising interest rates, that it may not be doing this as quickly as some investors think is necessary.