If you've been watching, the US dollar - euro exchange rate has dramatically changed in the past few days. The rate this afternoon is up to $1 = $1.14+. I would have thought, with no academic background to support this, that the euro would be lower because of Brexit and the economic crisis due to the virus especially in Italy. Anybody have an answer to share?
Likely related to the drop in US interest rates. 10 year US treasury bond yield is roughly .50%. Yes one half of one percent.
Without getting into politics, SOMEONE -- who won't be named, referenced, referred-to, acknowledged, thought-of, or otherwise brought into the realm of conscious thought -- decided that a weak dollar would be peachy-blanking-keen for American business interests.
Cue the Liberty Bell March and a giant foot stomping the whole sordid affair into paste.
I could get into a really long rant about what an enormous s**t-show is about to take place, but this is a travel website and not a financial blog, so I'll just keep my trap shut and go tremble in the corner until it passes.
-- Mike Beebe
$1.14 is still good. Granted, it’s not $1.09, but not bad. It’s better than the $1.21 rate when I was in Sicily in 2018, or $1.5 from a few years ago, but not as good as the $.90 from 2004. The exchange rates fluctuate constantly.
Could it be that the FX market does NOT have confidence in the US response (medical and economic) to the COVID-19? A lot of mixed signals coming out of the White House and the US financial markets are in a panic. And the Russian oil situation is adding fuel to the fire. A 2 or 3% change in the EUR to USD is insignificant to the stock market crash.
Why would you think that Brexit would have anything to do with the US and the Euro? That is an issue with GB and the pound. The simplest way to think of the dollar is that it is a commodity more reflective of supply and demand. Just as pork bellies and soybeans. At the moment future traders are thinking that there will be fewer dollars floating around and, therefore, if I need a dollar, I may be forced to pay a little more because fewer dollars are available. Why are few dollars available? The China market has been badly disrupted by manufactures goods not available to purchase and therefore few dollars are being sent to China. Same problem with oil. Oil has to be paid for with dollars so if the price of oil is substantial down (as it is) then fewer US dollars are being used to pay for the oil. Fewer US dollars in circulation. This is only simplistic and some may wish to nit-pick a few points but it is really supply and demand.
And where do you get the idea that a 10 year Tres is .5%.? It closed today at 4.99%. It may be down from yesterday (didn't check) by 0.5% but the 10 year yield is also 5%.
Whew...I wish Canada had it that good. We’re looking at about $1.50 to our dollar. I’d kill for that exchange rate. (And don’t get me started on the £)
Fed lowered the rates by 50 base points.
That means the return on investment is lower in USA than previously, so currency drops because demand of the $ decreases.
US Treasury rates straight from the treasury.
Long term graph. 10 year yield has not been over 3% in quite some time and probably not above 4% for the last 10 years.
Edit for link to graph
Well, how many ways can I say 'thank you.' You have all put things out there that contribute to the answer to my question. I too did not want to look at this in a purely political way (even though I agree - yup, we don't use that creature's name in my house). I expected a strong link with the virus' impact on every type of business. Indeed we live as part of a 'world economy' and 'hand washing' can only protect us so far.
That all said, there's a part of me that wells up with emotion when I see the difficulties and suffering people are going through. On this site we usually talk about the joys we experience, and tips want to share, from our Italian travels. I have 3 months before I leave for my annual 2 month trip. I'm still planning. I feel for those whose plans have suddenly been threatened. The exchange rate be damned - I get far more than I pay for when I go to Italy! Let's hope . . . .
"And where do you get the idea that a 10 year Tres is .5%.? It closed today at 4.99%. It may be down from yesterday (didn't check) by 0.5% but the 10 year yield is also 5%."
Uh, the 10-yr yield is .5 -- not 5%, but .5%. (well, .56 as of this post).
-- Mike Beebe
The Brexit will play a huge part in the Euro's valuation and future of the EU. If the UK is successful with creating bilateral trade deals and can even grow its economy, it will clearly show and give confidence to other EU member states that they too can leave the EU, create bilateral trade deals, and print their own currency, existing and even prospering as single nation states again.
Italy would love to go back to printing the lira and leave the EU. If Italy leaves next and the Dane's or Greece follow, The Euro will collapse. The Euro may collapse if Italy alone leaves. Next man up
The dollar index is currently sitting at 95.42 -- which by my standard still makes visiting Europe fairly cheap. Be patient....it will likely rebound and we may even see parity in the near future if Salvini continues to beat the drum to leave
The US deflates its currency to promote international trade...it is also a big oil/gas producer...and prices are dropping with less international travel...makes sense to me.
And if the UK flails, the euro will strengthen . . .
Looking at the history since Euro introduced in 2000 -- went from a low of $0.83 in 2000 to a high of $1.60 in 2008. Like the stock market, prices vary.
Your quotes are the other way around... EUR where it should be USD and vice-versa.
a weak dollar would be peachy-blanking-keen for American business
Yes, it does benefit US business interests. A strong dollar means imports to the US are cheaper so you can buy non-American made stuff for less, a weak dollar means more sales for US Exporters to other countries because those countries can buy US made stuff cheaper. Theoretically, a weak dollar would help keep US manufacturers in-house and not farm as much manufacturing to other countries. The downside though, RS tour costs will go up because he's paying more for hotels, restaurants, site tickets, etc.
So much for that sinking dollar, eh Boys and girls?
We go up....in a flight to quality and ubiquity
Lota scuttlebut that the IMF may have to come in to bailout the EU fairly soon
It is not hard to figure out...the lower the dollar...the more goods we can sell to Europe...the real issue is with China that really undervalues its currency.
I want a weak dollar when we come out of this so out factories will start up strong.
"I want a weak dollar when we come out of this so out factories will start up strong."
Not going to happen.
The USD is a reserve currency and is perceived as the safest haven.
Today, 3/21, it’s... €1 = $1.07
Oct 2019, it was... €1 = $1.12