Understanding Strength of Currency
The euro (€) was temporarily valued at $1.50. That means that 1 euro is worth $1.50, making the euro much stronger than the dollar. On the surface, that sounds like a good thing for Europe, but when the rates get too out of whack, it can severely affect global business.
The stronger the euro is against the dollar, the more difficult it is for Europeans to export their goods because they are relatively more expensive. In turn, if €1 used to buy $1.25 worth of goods but now €1 can buy $1.50, imports will increase because those good are relatively cheaper.
There are positives and negatives in having a strong local currency, but now you know why everyone in Europe is not completely excited with the idea of a weakening dollar and a strong euro. In turn, if you live in America, it’s probably not the best time to fly to Paris for the fancy handbag you’ve been eyeing for years. Instead, try making your own and selling them to the Brits. Cheerio!
Read on:
WSJ.com – Euro Tops $1.50, Raising Economic Concerns
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