After over two decades, the United States dollar and the euro have the same value. The last time that the US dollar was worth more than the European currency was back in 2002 when the euro had just been introduced.
Currently, one euro is down 11 percent from nearly $1.13 at the beginning of the year and down 15 percent from about $1.18 on July 13 last year. The American currency has also gained 15 percent against the United Kingdom’s pound and 23 percent against the Japanese yen. Due to such an increase, this has become the most favorable period to travel for Americans and other world owners of the US dollar.
Due to the increase in the exchange rate, Americans will be able to obtain €102 with $100, while last year, they had to pay $118 in order to get €100.
“This enhanced spending power has real ramifications for Americans when they leave the country and start spending on food, hotels, tours, and souvenirs. A year ago, a €30 meal cost about $35 dollars, vs. $31 today. Going back to 2008, a meal at the same price cost $47,” points out an article published by Business Insider.
Travelers will not be the only ones benefiting from the fall of the euro, as those buying from Europe will also benefit from the situation, as they are automatically able to buy goods for cheaper price, which at the same time will put downward pressure on inflation.
Yet, according to Wolfgang Koester, Chief Evangelist of Kyriba, a corporate cash management platform, the situation will negatively affect multinational companies based in North America but relying on revenue from overseas
“Corporate risk managers face a difficult challenge as inflation and currency volatility are increasing due to the myriad issues impacting global markets. We are seeing a doubling or tripling of their portfolio currency risk, and the cost of hedging is also increasing,” Koester claims.
The reasons being the euro’s fall against the dollar are many. According to a piece published by the Washington Post and jointly written by Aaron Gregg, Ellen Francis, and Bryan Pietsch, one of the main reasons affecting the equalization of the two currencies is the war in Ukraine.
“As part of a pressure campaign against its eastern neighbor, the 27-nation European Union moved to wean itself off Russian oil, while Moscow sharply reduced gas flows. That raised costs for Europeans already reeling from the pandemic,” the piece points out.
The fall of the euro had started on February 24, the same day when Russia started the aggressive occupation of Ukraine.
The piece by WP further goes on to emphasize that the US central bank has threefold rates in 2022, signaling its plans for four more increases as part of its strategy to bring inflation under control. At the same time, the US fed has been raising interest rates, pushing yields on Treasury bonds higher, and making the greenback more alluring to investors than the euro.
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