I live in Europe and i am not impressed with how things go around here.
I see the Euro getting bigger than the dollar and i wonder why does that happen.
The economy of Europe aint as good as the USA economy (basicly anything i buy except the food is made in Asia by american companies).
What determines the Euro to be more than dollar?
I am suffering from this since i work online and i earn USD.|||The price of two currencies is based on demand and supply.
That the dollar is dropping against the euro (or the euro is gaining versus the dollar) at the moment has sveral reasons:
The interest rate in the US is around 5.50 % and is not expected to rise while the interest rate in europe is still rising. This reduces the demand in dollars as the gap between the interest rate is closing (next incrase by the European Central Bank expected in December and the end is expected in summer next year with 4.5 %) and less money is moved into the dollar.
The european economy is in fact growing faster than the US economy: in the third quarter US 1.6 % versus europe 2.5. %. AN dthe US ecocnomy is slowing ( First quarter 5.6. %, second 3.6. %, third 1.6 %) while europe is expected to grow by around 2.5 % for the next 2 years.
The dollar is the reserve currency of the world (China and Japan have around 900 bn dollars each) and China has signalized to balance there currency portfolio and move more money into the Euro (this is maybe already happening).
The US run a so called double deficit in the budget (around 350 bn dollar) and in imports (around 700 -800 bn dollar) per year, meaning that the US imports more than it expoerts. And this is going on since several years. This is considered unsustainable, so in fact it is good that the dollars drop as this starts to reduce the deficit.
The OPEC (Organization of the Oil Exporting Countries) has hinted that they may change the currency they trade oil in will change to the Euro.
This correction in the dollar has been expected since several years and most economists are surprised howlong it needed. For the next 6 weeks it is expected hat the dollar will go the 1.37 $ per Euro, if the dollar braeks through this wall ..... ?
To balance the tarde deficit a dollar of 1.80/Euro would be necessary but then the world economy will go into shock !
If I were you: I would try to get part of my income in Euro (minimum what you need for living in Europe).|||Basically, currency exchange rates have to do with the investment climates in the respective countries.
If I have dollars, and I believe that I can earn more money investing in the euro countries, then I will sell my dollars to buy euros.
For example, if the bank/bond interest rates in Germany are higher than in the US by a margin I consider attractive, then I will move money there.
If there are companies in the euro zone which I believe will offer me a greater return on stock purchases than the US, then I will buy euros in order to buy those stocks|||well it doesn't atcually overtake the USD since parity doesn't mean anything. there is no reason why the exhange change should be one.
in general, an inflow of money into euroland makes the euro appreciate. I think the euro is not expensive but the dollar quite cheap, because there is so much of it.
check the big mac index for real overvaluation etc.
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