Why is the dollar so weak against the euro?
Economic conditions across the globe help explain why the dollar is so weak against the euro. Factors such as business cycles and investor expectations influence the exchange rate between dollars and euro.ValueLike any other product in the financial market, dollars and euro have a price called the foreign exchange rate.Supply And DemandThe euro may be stronger than the dollar because demand for euro exceeds supply, putting upward pressure on the euro’s value.Interest RatesThe monetary policy of central banks may influence interest rates which in turn influence the value of the dollar or euro. As a result, euro-based securities pay a better rate and attract more investors.ExpectationsThe euro’s higher value may be based on investor expectations that the European economy is more stable than the U.S. economy. This expectation helps explain the increased demand for euro.Business CycleDuring the 2009 U.S. recession investors preferred the euro because of the perceived safety of the eurozone
