The Euro Is At A 20-Year Low, And It May Have Further To Fall

The Euro Is At A 20-Year Low, And It May Have Further To Fall
Reda Farran, CFA

over 1 year ago1 min

The euro fell to a new two-decade low relative to the greenback this week, trading at just $0.9930. That’s a level not seen since 2002, just a few years after the currency came into existence. And it may go lower yet…

See, there are two parts to this story. First, the dollar’s been strengthening: it’s appreciated against virtually every major currency this year, in large part because of the Federal Reserve’s most aggressive rate-hiking campaign in decades. Higher interest rates, after all, make the dollar more appealing to international savers and investors.

Second, the euro’s been weakening: it’s fallen in value as the European economy contends with a whole host of problems – the war in Ukraine, higher energy and food costs, and a severe drought, to name a few. New data on Tuesday showed eurozone business activity declined for a second-straight month in August to hit lows not seen since February 2021. Germany, the bloc’s largest economy, was especially weak: business activity there fell the most since June 2020. Activity in France, meanwhile, decreased for the first time in a year and a half.

It all adds to growing worries that the euro zone’s economy is sliding toward recession. And if that happens, the euro could be headed even lower relative to the dollar…

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