Why the euro against the dollar collapses? – BBC

Why the euro against the dollar collapses? – BBC

Editor BBC

• January 6, 2015

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The euro is falling to levels not seen in almost a decade.

Remember when it was said, not so long ago that the euro was on track to become the new dominant currency of the global economy?

Those days are quite distant felt on Monday, when the European currency fell to US $ 1.1864 per euro, its lowest point in nine years. A row of good news about the US economy is a parade of negative reports on European

The result:. The dollar strengthens, while the euro collapses. And what is coming in the next few weeks may be worse for the European currency.

Some fear that Greek elections on January 25, in which a victory of the leftist Syriza is forecast to increase the risk of a departure from that country in the euro zone, which could lead to a more pronounced collapse of the euro

See also:. The euro fell to its lowest level in nine years

The impact outside

The value of remittances from Latin American migrants in Europe will fall.

Should turn this new trend alarms in Latin America?

It’s probably bad news for countries that, for economic or geopolitical reasons, sought found in the euro substitute the US dollar to constitute its international reserves or conduct international trade.

Also, Western Hemisphere countries seeking to expand their exports to Europe will find that a weak euro, if it remains so, become more cheap imports from the Old Continent, and in turn will make Latin American exports become more expensive to Europe.

For example, a German consumer will make more expensive Colombian coffee, so likely will buy less.

the purchasing power of European companies investing in the region also would be reduced. And in countries like Ecuador, which have the US dollar as their currency so more direct feel this devaluation of the euro against the dollar, the remittances sent by migrants to their families will be lower.

Europe relieved?

The fall of the euro cheaper European exports.

Instead, many in Europe see with some relief, at least in the short term, the prospect of an increasingly weaker against the US currency euro.

So believes Professor Iain Begg, an expert on European economic integration at the London School of Economics.

“From the standpoint of promoting exports, virtually all countries Eurozone will feel happy for the devaluation of the euro. Even the most powerful as Germany and France, industrial nations depend increasingly offer good prices for their exports, which will be provided with a cheaper euro, “said Professor Begg in dialogue with BBC World.

Also nations like Spain and Greece expect the weaker euro make their country more attractive to foreign visitors and thus help the tourism industry, crucial in both nations.

the trend of devaluation of the euro be maintained? Professor Begg says it is always difficult and risky to predict these variables. “The current devaluation of the euro partly reflects the political risk from Greece and the prospect of changes in interest rates in Europe and the United States,” said the professor told the BBC.

While believes that the central bank of the United States, where the economy is taking off, is preparing to raise interest rates to control the possibility of inflation, monetary authorities in Europe are going in the opposite direction.

Looking combat a deep recession by reducing interest rates, hoping that cheap loans revive the economy. This situation seems to favor more devaluation of the euro, for large investors believe that their dollars will pay them more interest than their euros, so prefer the US currency will fall further and the value of Europe.

Question policy

Many hope that Mario Draghi, head of the European Central Bank, drive a reduction in rates of interest.

But ultimately, the fate of the euro depends not only on the reasons for the market. That says Robert Peston, business editor of the BBC.

“Politics, not economics, is what threatens the long-term survival of the euro,” he said.

Well, unless the eurozone countries find a way to resolve the complex situation of millions of its citizens affected by unemployment and get dispel the feeling of disconnect between the leaders and the electorate, political pressures persist in Greece and other countries to leave the euro.

And with that political instability in the making, the euro will remain a risky and unattractive option for many investors.

What makes think of a 2015 where stakes are weak euro and away from that ambition that once had of becoming the strongest currency in the world.