Understanding if the dollar is stronger than the euro is vital if you’re planning on doing any travelling, investing, or simply want a better view of the world economy. So is dollar stronger than euro? Generally speaking, the answer to this question is no. But this could change in the future and for now is simply because of the current exchange rate of the dollar to the euro.
Like with all things money, the conversion rate today is not the end of the conversation. It’s a much debated and controversial topic among economists around the world, and in order to actually be able to provide a solid answer, there are a few different things that need to be considered.
What is Currency Strength?
The first thing to consider is what is actually meant by currency strength. It’s impossible to determine if the dollar is stronger than the euro if the strength of the currency isn’t something that is actually understood. There’s a range of different factors that go into this concept.
The strength of a currency generally comes from a combination of factors that determine what it’s worth, such as how it compares to the rest of the world’s currencies, how likely it is to change, and ultimately, how safe it is against the test of time. The reach of these areas has a massive influence on it.
Exchange Rate
For many people asking if a dollar is stronger than a euro, they’re looking for the exchange rate, and the answer is generally that a euro is worth the higher value. That’s in the sense that one U.S. dollar will get you under one euro, and that has never really changed, nor is it likely to, baring major political and economic changes.
Exchange rates do fluctuate, of course, but that is a different matter altogether. If you’re judging the strength of a currency by it having a higher exchange rate, then this is the end of the discussion. The Euro was created just over 20 years ago and was intended to have a higher exchange rate over the long-term.
It’s important to remember that the strength of these currencies does not always impact their value, and different exchange rates don’t necessarily result in different values. The two change, but their values are more of a token number.
Volatility
Another key area to look at when debating the strength of the dollar against the euro is the volatility that comes with the currency. No currency is completely safe, as markets are constantly changing and evolving — which is their nature. As countries, nations, and consumers behave differently, the currency of an economy does as well, and that can have a big impact on things such as usage and exchange rates.
One fundamental indicator of a truly strong currency is the ability to withstand this volatility and be a generally safer option to use. Although the euro and the dollar are both strong currencies in comparison to other world economies, the euro has seen a much larger fluctuation in exchange rates and in usage through much more complex internal market changes, with issues like Brexit and political clashes between nations and markets. This is something that the dollar hasn’t experienced.
As well as politics and things like GDP affecting currency strength through volatility, there are also less controllable factors at play as well, such as COVID-19. The slow response and low success of the U.S. in managing the COVID crisis have resulted in more volatility for the dollar, so the future of the market has now become a little shakier. It’s all a complicated minefield, but the dollar is generally in a sturdier place now than it was a year ago.
Usage
Finally, there’s the usage of the currency in the markets — which is also a big determiner of the strength that goes behind it. More widely used currencies may be seen as a stronger currency, but this is not an open and shut case.
The first arm of the discussion is with the number of countries that use the currency, and here the Euro has much more grounds for strength. It’s a part of an international market among multiple nations, and the likelihood of all of them having a negative impact on the European economy is much lower as a result.
On the other hand, looking at the wider picture, especially from a perspective of investing and the business use of currency, the dollar is much more commonly used as a form of currency across the whole world. In fact, the dollar had more than double the usage of the Euro in international trading over the last decade, which is a prime example of the strength that it has with it.
Conclusion
Ultimately, the strength of the dollar is as great as ever in comparison to the world economy, and it’s still used for the vast majority of international trading — and that makes a massive difference.
The euro, however, is used by many more countries across the world, and generally has a higher exchange rate than the dollar, as one dollar is almost always worth less than one euro. That can make a big difference if international transactions are frequent for you or your business.
In terms of volatility, the dollar tends to have less movement than the euro, however with COVID-19 having such an impact on economies, the dollar has seen more negative repercussions than the euro has, and this may have an effect on the strength of both in the future, but it’s an extremely tough thing to predict — especially in modern uncertainty.
If you’re looking to change dollars into euros or vice versa, Cashero can do that for you. Simply register, load your multi-currency account and you’ll be able to switch between USD, EUR and GBP in an instant.
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