European currency the euro hit a 20 year low against Doller

What are the consequences of the historical parity of currencies at their lowest level in 20 years against euro US dollar?

Euro is at its lowest level against the dollar since 2002.

European currency euro reached a historic high with the dollar after falling to a 20 year low.

The 02 currencies reached same value this Tuesday, marking a symbolic 1 1 indicating a 15% drop in the value of the euro last year.

European currency, the euro, hit a 20 year low against Doller

This means that value of the dollar & the euro is now equal whereas before the value of the euro was always higher than dollar.

The parity between 02 currencies comes at a time when fears of a recession are mounting in Europe with rising inflation & growing uncertainty over the continuity of Russian gas supplies.

Gone are the days when the euro was so strong 1.6 times the dollar during 2008 global financial crisis or 1 euro was equal to 1.6 dollars that many Europeans spent their holidays in US United States for cheap hotels & food. & after shopping, they would fill their suitcases & take them home.

But now the situation is very different economic consequences of the war in Ukraine &  European Central Bank decision to maintain interest rates are being borne by Europe.

Why is the euro sinking?

Euro depreciation has come in the wake of the energy crisis in Europe due to the (Rus-sian) invasion of (Uk-raine).

Concerns have+been raised about the possibility that the crisis could lead to a recession with unintended consequences a fear that was exacerbated on Monday by a drop in Rus-sian gas supplies and a rise in inflation. Will continue to increase.

Russian energy giant Gazprom has begun 10 day surveillance of its Nord Stream 1 pipeline with Germany & other European countries anxiously watching to see if the operation will follow. The gas will come back.

European currency, the euro, hit a 20 year low Doller

Russia could use the opportunity to close the valves.

Juan Carlos Marenez a professor of economics at IE University in Spain says: We will see if we continue to get gas from Ru-ssia.

The high interest rates in US United States are also one of the reasons for the blow to the currency in this conflict as interest rates in the US United States are rising very fast & it is attracting capital to the world largest economy.

In an interview with British news Mando Martinez said that main reason for the euro decline is the different pace of monetary policy between United State US Federal Reserve & European Central Bank.

For investors United States US Treasury bond yields higher than European debt which is why they prefer the US dollar over the euro.

From this point of view the European Central Bank is in a difficult position trying to control inflation & at the same time boosting the slowing economy.

Eurozone has not yet begun to raise interest rates Martinez said. It is expected to do so at its meeting in late July but it will raise interest rates at a slower pace than that of US United States.

European Central Bank

What are the consequences?

Since the eurozone inflation hit a record high 8.6% since the start of the record the devaluation of the euro has increased the cost of living by making imports more expensive.

For the second time in history a weaker currency has-not necessarily been bad news as governments use it to accelerate economic growth as exports become more competitive.

When the dollar appreciates it costs us more in euros to buy a barrel of oil say economists. That the decent thing to do & it should end there. 

That is why a weaker euro has contributed to the fact that fuel prices have reached an all time high emptying consumers pockets.

This situation is worrying for  countries of the region as about 50% of imports in the eurozone are in dollars.

If the war in Uk-raine ends soon which experts say is unlikely the euro could fall sharply.

European currency

Also Read 

Another way to stem the tide is to raise interest rates in the eurozone.

A more aggressive policy from European Central Bank will be necessary which is not the case at moment Martinez said.

Latin America

Elia Oliveros Rosen a senior economist at Latin America Global Economics & Research Division tells the British News Mando that in the case of Latin America parity between the euro and the dollar will not have a direct impact on the region.

He added that what this situation reflects is that US dollar is appreciating at the general level.

Read more :

Winning the National Bank case has saved him 24 million in fines imposed by the US government.

Emaar beachfront price Also Dubai Real Estate And taxes on them in Pakistan

Shariah compliant banks :SBP sought guidance from Supreme Court

The strength of the dollar is not only against the euro but also against most of the currencies of emerging countries including Latin America.

In fact Argentina Chile & Colombia are the 03 countries that have lost their currencies to their worst ever value against the dollar this year.