The 2011/10/31 at 05:45
Since the start of the sovereign debt crisis, the euro has even gone up in value, rising by almost 5 % ever since Europe came to the financial assistance of Greece in May 2010. On 27 October, the single currency went over 1.42 dollar, the highest point in the last seven weeks, following the agreement found by European leaders to endeavour to absorb the crisis in the euro zone. This level worries certain economists who would prefer that the euro drop closer to 1.25 dollars (0.91 euro). In theory, the euro should have been weakened by fears of a contagion of the Greek debt crisis to other euro zone countries.
But elsewhere in the world, major industrialised countries have been carrying out policies to weaken their currencies. The United States, the world’s leading economy, adopted in 2008 an ultra-accommodating monetary policy to maintain the dollar at a very low rate. As a result, investors have been borrowing dollars to invest in emerging countries with a high yield potential, such as Brazil. This strategy has pulled down the greenback as investors are selling dollars to acquire the currency in which they will be investing. In addition, markets are concerned about the United States’ budgetary imbalances and its fragile economic health. On the other hand, the euro zone could do with a weaker currency to relaunch its growth and exports.