Tag, Euro's It
June 11, 2010
The sagging value of the euro in recent weeks certainly has gotten the attention of many pundits.
With its current value right about the same $1.17 price it was at when it was first introduced at the beginning of 1999, you might be forgiven if you think that as currency experiments go, this one has been remarkably stable.
Anybody who thinks that hasn’t been watching the foreign exchange markets do their thing on a daily basis.
Markets don’t like stability. Nobody can make a profit on stability.
Something must either be rising or falling for traders to get their profits.
Direction is less important than changes in price.
At first traders drove the value of the new currency down. By the time real euro coins and bank notes were introduced into circulation at the beginning of 2002, the currency had fallen to 82 cents.
Then the rise started.
It doubled in value in dollar terms from 82 cents to $1.60 by 2008.
At the lows there were jokes about the future of any currency that ends in a vowel. This was succeeded by the view that the U.S. dollar was dying and the euro would replace it.
Now we are back to the storyline that the euro is tottering.
What do you make of all these stories?
Rather than guessing about facts we cannot find, it is better to focus on the improved exchange rate and plan your long-awaited trip to Europe to take advantage of the favorable exchange rate.
Better yet, perhaps you can buy some coins on your trip and take advantage of the 25 percent reduction from the peak in the euro’s exchange rate.
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