Euro Versus the U.S. Dollar

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Some financial analysts forecast the U.S. dollar will depreciate further against the Euro throughout 2011 and 2012. In actuality, there is a consensus projecting that the Euro will actually depreciate further against the dollar, not vice versa. The Euro’s decline manifested last year and has since seen a decline as recent as this week. Future traders have publicly talked about how the Eurozone has too many issues with countries defaulting. According to futures traders, the problems facing the U.S. will be easier to overcome than that of their European counterparts. According to the Bloomberg article Euro Drops to One-Week Low versus Dollar on European Debt Crisis ( Catarina Saraiva, 2011), “the euro declined to a one-week low against the dollar a day after Portugal became the second nation in the currency region after Greece to receive a junk credit rating from Moody’s investor Services”. The European Union has too many problems to fix in such a short period in order to keep the Euro from depreciating any further. The European Central Bank (ECB) has an enormous job of trying to keep some of the union member countries from defaulting on their debt. There are many countries in the same situation as Greece. Greece right now is trying to come to terms with its debt and the austerity measures that were enacted to put its fiscal policies in order. Greece owes over 300 billion Euros with their Debt to GDP ratio currently at 112.6 percent of GDP (The Economist, 2011). What this means is that whatever money that Greece takes in, 100 percent of that is taken to service their debt. However, since Greece spends 112.6 percent of GDP the government’s GDP is negative. This means there is no way that Greece can get out of this situation, as it cannot pay off its debt. It is due to this that Moody’s, Fitch and S&P have all downgraded Greece’s bonds to junk status. This puts Greece in a...
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