Moving South

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Weaker Euro Expected to Drop Further Against U.S. Dollar

euro dollar ap
These days it's the dollar that's moving up against the euro.
  • Why it matters

    Why it matters

    Europe’s common currency is at its lowest point versus the dollar since last fall and most expect it to drop further.

  • Facts

    Facts

    • Janet Yellen, the U.S. Federal Reserve chairwoman, will address the interest rate issue Friday at the International Economic Symposium.
    • More than 90 analysts agree the value of the euro could plummet to $1.28 by summer 2015.
    • Worries about the status of the euro going forward have crushed a brief stock rally with both the DAX and the EURO STOXX losing ground.
  • Audio

    Audio

  • Pdf

For most of 2014, the euro has known only one direction: down.

Since the beginning of the year, it has already lost more than 3 percent in relation to the U.S. dollar, falling under the threshold of $1.33 for the first time in almost a year on Wednesday. With an interim value of $1.3273, the last time the European common currency was worth so little was in mid-September 2013.

Behind the downswing in the euro are the varying expectations regarding interest rates in the euro zone and the United States. While the European Central Bank will most likely keep the prime rate low for a long time to come, the first rise in U.S. interest rates in several years is expected during the second half of 2015.

Investors were particularly nervous on Wednesday night as they awaited the expected release of the minutes from the late July meeting of the Federal Reserve Bank. Analysts at the Helaba Landesbank believe Janet Yellen, chairwoman of the Federal Reserve, will continue her efforts to downplay expectations of a quick turnaround in interest rates.

She’s scheduled to address the International Economic Symposium on Friday at an annual Fed conference in Jackson Hole, a resort in Wyoming. The symposium attracts central bankers from around the world including European Central Bank President Mario Draghi, who is also scheduled to speak. The theme of this year’s conference is “Re-evaluating Labor Market Dynamics.”

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