Dollar to Euro Rates

The major global investors in the US Dollar, Russia, China and India, have shown indications that due the recent economic tabulation and financial crisis, the international monetary system needs to be amended. However, these countries are treading carefully, in case the dollar slumps, which may lead to a drop in their dollar-denominated investments.

Euro has sure come a long way ever since it was circulated in 2002. The official currency of 16 member states of the European Union, except UK, some 327 million Europeans use the currency daily. How does Dollar fare against Euro? What should be expected of these two currencies in the coming years?

Most financial experts think that the US Dollar will continue to decline against the Euro. In the coming years, Euro is predicted to eventually become the world's undisputed reserve currency, thus taking over US Dollar. However, in the recent times, when several banks and companies got bankrupt, investors started to put their money into stable foreign exchange and precious metals. This led to a sharp appreciation in the value of dollar against major world's major currencies, including the Euro.

The US dollar has much longer in circulation and therefore looked upon as more reliable by investors. Basically, the Euro is now as stable as the US dollar as it has the support of the European Union which is an alliance of European nations. The ability of Euro to endure any global financial and economic crisis is sure to improve over time. More and more of the sovereign wealth funds and countries are already buying Euro as reserves.

The rate of US dollar and Euro is affected by many factors. The value depends on the relation of the two with each other as well as to other currencies. The interest rate differential between the Federal Reserve and European Central Bank influence the currency values when compared to each other. The Fed often mediates in the open market movements to make the U.S. dollar stronger. This could make the EUR/USD cross decline in value if the U.S. dollar gets strengthened compared to the euro.

The EUR/USD currency pair is the most heavily traded in the world. Many forex traders don't even go for any other currency pair as this pair suggests the greatest liquidity and volume. The future of the EUR/USD will also determine the direction of the currency pair as a whole. When looking at the Euro conversion rate over the last few months, it was 0.72. Comparing it to average rate over the last 10 years, the rate was 0.80, the lower Euros to US Dollars exchange rate is a strong indicator that the EUR/USD in the long term will be show a lower rate trend. The US dollar has an unstable future when compared to the Euro.