This past week saw the Dollar falling to an all time low against the Euro amidst pressures and reluctance of foreign investors to invest in America due to the ongoing trade deficit and global volatility in the markets. Amidst all these developments, the Dollar slipped as low as 1.59, which means that one Euro brought 1.59 Dollars.
The fall of the Dollar started in the mid-week when data from the international markets started showing a decrease in the amount of foreign currencies flowing into the US. This led the investors into speculation and most of them started to either withdraw their money from the US markets, or stopped investing further, which led to the fall of the Dollar, not only against the Euro, but against the Yen and even the Rupee.
The main reason behind the rise of the Euro has been the fact that the US is enforcing stringent tax laws against Chinese products flowing into the US, especially the textiles and the steel products. In reactionary actions, the Chinese government had in turn stopped investing into the US markets, and rather they have started to foray into the European and Japanese markets, making the Dollar weaker and the Euro and the Pound stronger on the International front. Looking at the Chinese reactions, small and medium sized investors have also started investing in the Euro, which is considered to be the apt Universal currency against the Dollar, which is the universal currency presently.
Terrorism is also a reason behind the decline of the Dollar. It is not that European nations are secure against it, but the investors feel that the Euro covers a larger geographic area than the Dollar and therefore, an attack in one of the countries where the Euro is existent will not hamper the overall worth of the European markets, and therefore, hypothetically at least, the Euro is more cascaded against the ill-effects of terrorism as a currency.
Over the next few weeks, it is speculated that the Dollar will recover, but the Euro will hold a commanding position over the long run considering the American Fed’s policies, effects of terrorism and the genuine charm of investing in a universal currency such as the Euro.