Euro (€)

The euro was created to encompass the geographic areas that were once the purview of the mighty German Deutschemark, French franc, etc. The transition to the euro went more smoothly than most expected. And as confidence in the euro grew, its value increased against most major currencies.

 

After drooping in the fall of 2008 as investors fled risk and to the safety of the U.S. dollar, the euro experienced a brief rebound against the U.S. dollar and regained some ground against the yen. However, as investors remained risk averse, they took sanctuary in the yen and U.S. dollar. The euro once again climbed during the summer and into the fall of 2009 as investors became less risk averse. The euro has been besieged as the fiscal problems in Greece and to some extent, the ongoing Spanish and Italian woes. Some analysts look at the crisis as a test of survival for the euro. The euro rose after the successful completion of the bank stress tests in July 2010 but quickly sank as the sovereign debt problems spread to other countries including Ireland, Spain, Portugal and most recently Cyprus. The euro was pummeled by continuing worries about the sovereign debt and investors' search for safe havens in the U.S. dollar and yen. The currency rallied in February 2014 after retreating in January. The euro eased in March but rose again in April. However, it slumped again in May only to increase once again in June. However, the currency has declined against the U.S. dollar since then with the pace of the decline accelerating on the introduction of quantitative easing by the ECB and the strength of the U.S. dollar.

 

 

After a brief rebound at the end of April and into May, the euro has once again been declining, mostly due to the situation in Greece combined with the strength of the U.S. dollar. While investors expect an interest rate increase from the U.S. Federal Reserve before the end of 2015, the ECB's quantitative easing is expected to continue for some time to come.