From the point of view of a simple and inexperienced logic in economic and financial subtleties, the higher the exchange rate of any currency, the greater the number of monetary units in the currencies of other countries, the better. The principle of elementary thinking “the more the better” works. However, the more developed an economy a particular economic system is, the more extensive external relations it has established, the more acute the problem of an expensive currency becomes. Both the European Union and its currency, the euro, have come face to face with this problem.
What does the euro mean
First of all, it should be noted that in itself the high rate of the European currency is nothing criminal or deliberately losing. After all, the concept of "currency rate" is a concrete expression of those abstract processes that show the strength, stability and significance of an economic system. The exchange rate in relation to other currencies is an indicator of which country (or group of countries, as in the case of the European Union) has a higher economic potential, higher productivity in relation to other countries. So when the real value of a currency is really high compared to other currencies, it is an indicator of its economic potential. In addition, the fact that the euro is a more expensive monetary unit than the same dollar puts the euro at the forefront of a number of world reserve currencies (that is, currencies that many states use for various kinds of economic transactions). If we accept the fact that money is a specific commodity (and this is the basics of economic theory), then it turns out that the European Union has a better product (the euro) than, for example, the United States (dollar), which means that it is the European “good” will be in the greatest demand in the world. When the goods are actively bought, it is very positive for the "seller".
What's wrong with a high euro exchange rate?
However, with the euro, this is precisely the case when the negative consequences for the EU economy from the high cost of their own currency are much greater than the positive ones. The key point here is the fact that it makes sense to talk about the benefits of a high exchange rate when this exchange rate is objective, really reflecting the ratio of currencies and the economic systems representing them. According to various calculations, the real ratio of the euro to the dollar should be between 1.2 and 1.3 dollars per 1 euro. At present, the euro is overvalued - and this is where the problems begin. The too high cost of the European currency means that on the international market, due to the specifics of exchange operations, European goods will have a higher real value than their competitors from the United States and even more so from China, whose authorities in the first case do not prevent the weakening of their currency, but in second, they directly restrain growth towards real value.
The high cost of the euro entails another problem - the outflow of capital to other economies, to economies with cheaper currencies. The most obvious example is the rapid growth in the number of production facilities of European companies in China. The calculation is simple - since it is cheaper to produce goods in China, you can gain a competitive advantage in the market. And this means that now those goods that were previously produced in Europe at local factories by local workers are being produced by China's huge labor army. European workers lose their jobs, the EU treasury is deprived of tax revenues from goods produced and sold in the territory of a united Europe. And it is the high exchange rate of the euro that is largely to blame for this.
In addition, it turns out that it was the European Union that, through its expensive currency, paid out of its own pocket the largest competing economies, the United States and China, for their gradual exit from the economic crisis. Cheaper US and Chinese currencies provided cheaper goods, and during the crisis, even those who could previously afford to buy more expensive goods moved to the lower price segment. In the future, this means a very high probability that when the consequences of the global crisis are overcome, Europe will come back to the high current rate and, against the backdrop of competitors who have got out of the financial storm with minimal losses, it will begin to lose ground. This could lead to a decrease in the real value of the euro and such a scenario would be the collapse of all European ambitions to make the euro the world's main reserve currency.
Alexander Babitsky
Residents of Russia are closely following the changes in the bi-currency basket (even those who do not have foreign currency savings), because they understand how much their life is connected with these two indicators. But economics, unfortunately, is not algebra and geometry: there is no clear and unambiguous answer. The strange thing is that the ruble is falling against only the euro. Against the dollar, since July, our national currency has grown by 1.5-2%.
Who loosens the deck?
The question of why the euro is growing and the dollar is falling against the ruble is easy to answer. Even the laziest could not help but notice from the news reports that the great power in the face of the United States has put in so much effort that it is surprising not that the exchange rate is falling, but how slowly it is happening. But why the euro is growing (2013), perhaps the American situation will not give an answer.
In connection with Russia's accession to the WTO, the high exchange rate of the ruble for the Russians themselves will be a tragedy. But the expensive euro will have an unfavorable effect on the consumer basket of a Russian. As practice shows, our population likes to buy imported goods at a low price. And it seems profitable at first sight. After all, many imported goods are much cheaper than local ones due to low export duties. Therefore, importers will benefit from the high exchange rate of the national currency by flooding the country with cheap foreign goods. And what the domestic manufacturer produces will remain in warehouses.
Where it leads?
Enterprises - our partners - will begin to close. Or our own factories, having lost the competition with cheaper and better imported goods, will also close. A rhetorical question arises: "To whom to give loans, to whom to build houses?"
Economic protectionism, in a reasonable amount, has always been useful for a country that uses an instrument to protect its own producer. Therefore, the state, to the best of its ability, maintains a low exchange rate of the ruble so that the economy does not collapse.
Capricious currency
Simply put, the answer to the question: "Why is the euro growing?" extremely simple. they artificially inflate the exchange rate so that their own economy does not collapse during the crisis. The name of this phenomenon is devaluation. Most likely, maintaining the exchange rate of the ruble is expensive for our Central Bank, but everyone knew what Russia's accession to the WTO would cost. Recently, oil prices have stabilized, there are no sharp jumps in dynamics - this is an obvious plus. But such fluctuations also affect why the euro appreciates.
If we go from the opposite point of view, a strong euro currency is not so beneficial for the Eurozone itself, for the same reason that we do not need a high ruble exchange rate. And then it becomes not entirely clear why our civilized neighbors do not take action. The only currency that behaves predictably is the pound sterling - rising slowly against all currencies. Now it is clear why the far-sighted Britons did not want to change their pounds for euros.
Why is the euro growing slowly?
This is facilitated by the growth of the public debt of Germany, the main donor of the Eurozone. Plus, the main meaner of the Eurozone is France. The state simply raised taxes (everyone remembers how Gerard Depardieu became a Mordovian farmer?). A control shot was the increase in VAT in Italy (up to 22%). In hot Italy, not all people are as patient as the Russians. Recall that in the economic history of Russia, VAT was applied simultaneously - 20% and sales tax - 5% (total 25%). The ingenuity of Russian bankers sometimes surpasses the Jewish one, since they decided to indirectly increase another 1% to 25%. In fact, we got more, since at first VAT (20%) was added to the price, and sales tax (5%) was calculated on the resulting amount, and instead of a net 25 percent, we paid 26%.
Neighbors also suffered
But the question of why the euro is rising does not only arise in Russia. also feels negative dynamics for himself. This was influenced by the statement of the head of the Fed (US Federal Reserve System) that measures to stimulate the dollar exchange rate are postponed to November-December. And the lever that lowered the dollar and at the same time played to increase the euro was the rise in gold prices (3.5%).
It is worth remembering that economic laws are a set of factors that affect the world market, and one of them will never be decisive for global changes. It remains only to observe the further development of events in the economy and in the world.
When the exchange rate of foreign currencies grows by leaps and bounds, then people who save their money in rubles are at a loss, but what to do? Mass change money? But what currency is better to choose in this situation? After all, most likely, in the future you will have to pay for a mortgage, you will need to go on vacation, repay friends.
Experts who are well versed in the financial world, earning money on foreign exchange transactions, constantly monitor forecasts, analyze the market, considering options for profitable acquisitions. Thus, the question of buying dollars or euros is more relevant today than ever.
Sale and purchase of foreign currency
Choosing dollars or euros, each person strives to level the risks associated with inflation of the national currency. Also, many pursue the opportunity to increase their capital. In this case, one cannot do without an analysis of currency trends.
For several years, there has been a steady appreciation of the euro, while the dollar has been gradually losing its positions. And if earlier financial experts bet on the US currency, today their opinion has changed dramatically. The Ukrainian crisis, hostilities in this country, contributed to the fact that the value of the dollar began to decline. Therefore, the use of this investment tool should be avoided for the time being.
The decrease in foreign currencies is primarily due to political factors, but experts believe that fluctuations in the market can be caused artificially. Also, analysts say that at the current time, you should try to avoid making rash purchases (unless it is necessary) of the dollar or euro, so as not to lose your own funds.
What to choose: Euros or US dollars
If you decide to buy foreign currency, no one will give you accurate forecasts at the present time. Therefore, a diversified investment method should be used. It is quite simple and reliable.
You simply purchase the types of currencies you need at the rate of 50% to 50% or divide the ratio into three or more parts if there is room for several foreign currencies. This will help you not to sink in the event that one of the currencies loses its position. Thus, you can reduce your risks.
Of course, this approach saved many when the purchase of the currency was carried out even before its appreciation. In the meantime, this is a kind of roulette in which you have to guess when it is better to buy dollars / euros - tomorrow or today. The situation is changing rapidly every hour.
Keeping money in foreign currency: what to look for
Each purchase of foreign currency requires a balanced approach, so you should decide for yourself a number of questions:
Before setting aside money in dollars or euros, answer a number of questions for yourself:
1. What currency is more expensive/cheaper today. This will help you analyze the ratio of the euro to the dollar in the foreign exchange market. As of January 2020, the ratio is 1.1204. If we take into account historical parallels, then even a value of less than 1.1-1.2 indicates that the dollar is expensive (in relation to the currency of the European zone); when the value rises to 1.3, the euro strengthens its position. As for the values of the dollar and the euro, a constant decline or growth is unacceptable for them, it would be more correct to say that the levels of rates fluctuate in the range of the indicated values. And when the US dollar is expensive, it's time to buy the euro, and vice versa.
Deutsche Bank's latest trends showed the world a protracted decline in the euro against the dollar:
For the current 2020, the ratio will be at the level of 1.10;
By 2018 - 1.00;
For 2019 - 0.90.
2. What type of currency is more common in your region of the Russian Federation. Let's say the euro is important for Kaliningrad, since the border with the European Union is very close. As for other regions of Russia, they are pegged to dollars.
3. For what kind of calculations did you need the currency. This is an important question, since it makes no sense to purchase another currency if settlements in another are planned in a month or two. For example, if you are planning to travel to Asia, then buy US dollars, if you are going to Europe, then euros.
Having found the answers to all the above questions, listening to the forecasts, analyzing the changes in the foreign exchange market in recent years, you will quickly make the right decision.
In order to find out the euro dollar exchange rates and compare which is more expensive, the visitor of our resource just needs to look at the chart below, which displays EUR USD quotes, they are updated 24 hours a day every second and are relevant at every current moment
The chart is formed in real time and displays the state of the euro dollar currency pair and the dynamics of its change for any selected time period, so the user can independently observe the trends in the behavior of the EUR USD currency pair and draw conclusions that the relatively young euro currency stably holds positions more expensive than the dollar
The graph will show which is more expensive - the euro or the US dollar
The chart clearly displays euro quotes against the dollar and will help answer the question which is more expensive euro or dollar. In 2002, when the new euro currency was introduced, its exchange rate against the dollar was 1:1. Over time, most of the countries trading in the Eurozone began to diversify, that is, distribute their gold and foreign exchange reserves to minimize risks, and the demand for the euro on currency exchanges increased significantly compared to the dollar. To date, the situation has not changed, and the European currency is valued more than the American one.
Although this situation seems to be a long-term trend, however, any user can independently verify the price ratio of the euro and the US dollar, no matter what scenario of the behavior of the EUR USD currency pair unfolds. The chart accurately displays all the ups and downs in the euro dollar quotes, the price value of the euro at any time is accurately displayed on the vertical value scale up to the fifth decimal place. In addition, the horizontal time scale is scaled using an interactive toolkit, which allows the user to select any time period for observing the dynamics of the euro dollar exchange rate.
What is better, dollars or euros, what to store in? To make a choice, answer 3 questions:
1. Expensive or cheap dollar (euro) now. To do this, just look at the euro/dollar ratio on the currency exchange. Now it is 1.0783 (as of 03/23/2020 18:30 MSC). Given the historical values of the euro / dollar, we can assume that a value less than 1.1-1.2 indicates an expensive dollar (relative to the euro); more than 1.3 - about an expensive euro. The dollar and the euro are hard currencies, their exchange rate relative to each other does not grow (fall) indefinitely, as to the ruble, but fluctuates around the indicated values. Of course, if the euro is expensive now, it makes sense to pay attention to the dollar, and vice versa.
2. Which currency is more in use in your area. For example, in Kaliningrad they like the euro more, the EU border is nearby. In other regions, the dollar is more in use.
3. What currency are you planning to pay in? It is always more convenient to have the currency in which you plan to make payments. Are you going on vacation to Europe, save euros; to Asia - dollars. It is foolish to buy a currency in order to exchange it for another with losses later.
By answering these 3 questions, you will understand which currency to buy. If the answer to one question is one currency, to another - another, evaluate which question is more important to you. And buy. Or wait. Buy now or wait? See the answer to this question.