Readers Question: WHAT ARE THE PREDICTION FOR THE DOLLAR $ AGAINST THE EURO FOR 2009?
2009, will probably see both EU and US economies enter into recession. So far, the EU has been slow to cut interest rates; it has given greater prominence to the spike in inflation rather than the slowing economy. However, the economic slowdown has been greater than many anticipated in the Eurozone. With oil prices and hence inflation falling, you would expect the ECB to finally relent and allow a significant cut in interest rates. As EU interest rates are cut, there will be less demand for Euros and the exchange rate is likely to fall.
The EU is also struggling because of the current high value of the Euro. Using measures of purchasing power, the Euro is overvalued making it difficult for EU exporters. It is hard to see a further appreciation in the Euro because it is already to overvalued.
On the US side, interest rates are already low (1%) therefore, it is hard to see interest rates falling much more (US already has negative real interest rates). On the other hand, the US has so far avoided technical recession but, the ongoing credit crunch means that a deep recession is more likely.
Will Euro replace US dollar as global reserve currency? Because of the weakness in US economy, national debt, current account deficit, people feel the US economy is standing on the precipice and could collapse. However, many of the problems in the US economy are also replicated in the Eurozone. The EU is not immune from the credit crisis as many banks struggle to survive. Housing markets are even more overvalued in Europe and National debt is higher in many EU countries than US.
Having said all that, how can we actually predict exchange rates?
Currently $1= 0.73 Euros. 1 Euros would get you 1.36 US $.
My prediction would be for a rise in the value of the dollar against the Euro, but, only a small unconvincing appreciation.
See also: US Dollar Collapse?
I just returned from Europe last week. The Euro goes further than a dollar in Europe. A Coke is usually 1 Euro, but many candy bars are below 1 Euro.
Now that we know the Euro is down to 1.29 USD, where do you see it going from here?
“Housing markets are even more overvalued in Europe and National debt is higher in many EU countries than US.”
Housing markets are surely not overvalued . We had and have another finance system the “Bausparvertrag”. Sure England and Ireland also Spain struggle problems, because they where proud to do it the American way.But this is not the whole E.U
Americans buy every time on credit, never think to pay back.
I think Germany is facing the crisis in a balanced way .
Funny those predictions eh…1.29 USD. What about 1.4735 USD today!
Exactly what I was going to say Frank! I live in Germany now, and get paid in Euros, which I then transfer to my US bank account. I’m enjoying it!
What is prediction now guys as today Euro-USD reached close to 1.48. I see it positive and expect it to rise till 1.50 and then fall but that will be from Jan 2010 onwards.
I’m going to Germany on a budget in late October/Nov 2009. I was compelled to buy tickets when I saw them for $475 RT. I’m sweating every day, as I check the exchange rate. Is there a way I can buy ~$5k? Euro now, set it aside, and then exchange it back to USD when I see the exchange rate go up in a few months from 1.4796, where it is now. I’m not really looking to MAKE money; my desire is to have less of a net loss in the exchange over a period of time. Any sound advice for me out there?