In the world of money and currencies, there is one currency that rules them all: the United States dollar. However, just because this currency is used more than any other for worldwide transactions it does not necessarily mean that it is the world’s most valuable currency – the dollar has strong competitors in both the British pound and the euro. While the United Kingdom may be a small country, its wealth is vast, and the pound has been a currency longer than the United States has been a country. The euro, on the other hand, is a relative newcomer to the currency market – scarcely twenty years old, it now has immense power due to Europe’s overwhelmingly large population and economic strength.
In today’s article, we’re going to discuss the euro versus the U.S. dollar to see which is the strongest currency; we will also look at some of the key reasons for the strengths of both currencies.
The Case for the Dollar
The U.S. dollar dominates world trade. When you google the price of gold, you’ll be told its price in dollars – the same holds true for silver and oil, as well.
Even if you don’t live in the United States, the price of gasoline at your local gas station may be influenced not by the price of oil, but by the value of your home currency in comparison to the dollar. The price of oil can stay stable at a fixed price, but if your currency declines against the dollar, it may suddenly cost more of your money to buy that same amount of oil. In this way, whether people realize it or not, the dollar has an immense amount of control over the financial lives of almost every person on the planet.
Due to the United States’ status as the world’s largest economy, world financial markets have faith in the credibility and reliability of the dollar. This means that when tough financial times begin, people often move their money into dollars. Consequently, because the demand for dollars has now risen, the value of the dollar versus other currencies has increased. For this reason, you’ll often see the dollar rise as compared to other currencies in times of economic uncertainty.
The Case for the Euro
So, why aren’t we all trading pieces of paper with pictures of dead U.S. presidents on them? To put it simply, you never want to put all your eggs in one basket. The strength of the euro lies in its gigantic Gross Domestic Product (GDP) of 14 trillion dollars. The total GDP only takes into account countries that use the euro currency and does not include European countries that, while they may use different currencies, frequently conduct transactions using the euro, thereby increasing demand, which subsequently increases the value of the euro.
Furthermore, the case for the euro is bolstered by the fact that there are 19 countries using the currency officially. This makes it the most widely accepted currency in the world by the number of countries where it is currently used – it doesn’t even have to be used officially to be widely accepted.
For example, if you were to try and pay with U.S. dollars at a small shop in Poland where they use the zloty (and not the euro), they may be hesitant, as it means they’d have to find a currency exchange. Try paying with euros, on the other hand, and it’s nearly guaranteed the shopkeeper will take out a calculator and helpfully take your euros while giving you change in the local currency. The same is typically true throughout Europe.
Which Is Stronger?
In the long run, every currency’s central bank (The ECB for the euro, and the Federal Reserve for the dollar) can manage their debt obligations to come out on top. For its first 15 years in usage, the euro remained the stronger currency, trading at one euro for $1.35, on average. However, over the past decade, the tables have begun to turn as government debt swells to new heights on both sides of the Atlantic. People are increasingly turning to the dollar as a shield against the volatility in world markets.
As of mid to late 2022, the dollar and euro are neck and neck for the strongest currency. To date, the prices for the Euro have dipped as low as one euro for $0.96, which put the dollar on top. However, at the time of writing, the exchange rate is currently one euro for $1.03.
If you’re looking to change euros into dollars (or vice versa), Cashero can help. Simply load your multi-currency wallet and you’ll be able to switch between USD, EUR, and GBP in an instant!
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