What's Correct Value?
October 28, 2008
As I sit here this morning wondering what to write, my eye keeps going back to my watch. It is a euro watch. It was created by the Austrian Mint before the euro was actually introduced into circulation in 2002.
The face of the watch depicts the design of the 1-euro coin, though it is much larger than the coin is.
I think about this because of the large fluctuations that have occurred in the foreign exchange markets since the euro was created.
At the beginning of 1999 the euro came into existence as an accounting convention in the nations that agreed to use it. Their national currencies were fixed to the euro.
On the foreign exchange market the euro began trading at approximately $1.17.
Wow, you might say. The euro today is $1.25. That's remarkably stable.
If you had no other information, that would seem to be a reasonable conclusion. However, the euro trades everyday on the world's foreign exchange market and its price has been anything but stable.
It began life by declining against the dollar. It got to 82 cents in 2002 and then began to climb. It hit $1.60 just a few months ago and began to decline again.
Now it is at $1.25. Who knows? It might even see $1.17 again in time for its 10th anniversary Jan. 1.
Here's the test. What's the correct value?
Something to add? Notice an error? Comment on this blog.
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