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What are the reasons for the rapid decline of the euro against the dollar?

 PARIS - In a record drop not seen in 20 years, the price of the euro fell to match the price of the US dollar, with serious repercussions and many repercussions on the European economy, inflation and the purchasing power of citizens.

Yesterday, Tuesday, the European currency exchange rate reached below the level of one dollar (0.9998 dollars) in - a short period - for the first time since 2002.

According to Bloomberg website data, the euro exchange rate fell by more than 0.7% to $1.0038, at a time when the dollar was strengthening due to its safe haven status and raising US interest rates.

What are the reasons for the rapid decline of the euro against the dollar?

Russian war:

According to experts and observers, the Russian-Ukrainian wars and their fueled by a sharp rise in energy and fuel prices played a major role in this record decline of the euro against the dollar, especially in light of the economic downturn and 

the rise in the inflation rate in the euro area to more than 5% at the beginning of this year, which is The highest percentage for the European continent in 30 years, according to the latest figures published by the Eurostat Office of Statistics of the European Commission.

european economic recession:

For his part, economic analyst and expert Daniel Melhem pointed out that the weakness of the euro price is not primarily a result of the weakness of the euro zone or the war, but rather the strength of the dollar and the increasing demand for it in global markets, and this is what drives it to this great rise.

He said that most energy prices in the global market are priced in dollars, and therefore the rise in energy prices automatically leads to an increase in the demand for the dollar, and as a result of all this, the dollar has become a safe haven in the market and the demand for it has increased.

He added - in an interview with Al Jazeera Net - "But despite that, the euro is not only weakening from these factors, but its weakness is also due to the weakness of economic activity in the euro area and weak growth in Europe, especially the recent negative indicators that appeared in Germany and several major European countries, It fuels the hypothesis that Europe will enter a state of economic stagnation, which will lead to a weakening of the value and price of the euro."

For his part, the economist and currency specialist Dr. Kamil Al-Sari believes that this decline was expected, because the economic sanctions on Russia directly led to this contraction and setback in the European economy, and the beginning was with the crisis in the German economy, and this of course directly affects the European currency.

He also stressed that the high energy prices and the crisis of gas supplies from Russia to Europe, make the economic situation better in the United States than in Europe, because Washington is not only a producer of gas and oil, but also exports them, and therefore there is no energy crisis.

The euro became a legal currency on January 1, 1999, in 11 of the 15 countries that are members of the European Union at that time, and it started electronically only, and then took the form of banknotes and coins starting from January 1, 2002.

Today, the euro is the official currency for about 340 million people in 19 countries of the European Union, and Croatia will be the 20th country to adopt the euro as an official currency, after the European Union finance ministers approved its request yesterday, Tuesday, and the decision will enter on the first of January The second 2023 comes into effect.

Can we expect a bigger collapse of the euro?

At a time when fears are increasing about the development of deflation and economic stagnation, in light of rising inflation and increasing uncertainty about the continuation of Russian gas supplies, the situation is becoming “very delicate” for European countries, given that nearly 50% of these countries’ imports are denominated in dollars, so can we expect a collapse The euro is bigger in the coming days, and what are the prospects for the European currency in this situation?

Al-Sari answers this question, saying, “I expect the euro to fall in the coming months, because we are at the beginning of the gas supply crisis, because European countries currently have sufficient reserves of gas because we are in summer, but with the advent of autumn and winter and the doubling of gas consumption, the situation will deteriorate more and therefore the euro will fall.” More, and this large rise in oil and gas is harmful to the European consumer, especially to European companies, and this boosts inflation and exacerbates the crisis further.”

The currency expert stresses that the future prospects for the euro are ambiguous and bleak unless the European Central Bank or the US Federal intervenes, because the dollar’s ​​strength is mainly due to the strength of the US central bank’s intervention, unlike the European Central Bank, which does not interfere much in the euro and therefore we find it exposed to problems and landing.


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