The US dollar and the single European currency, the euro, have been consistently close to so-called parity. That is, the rate at which the two currencies trade at a one-to-one ratio. However, the dollar lost slightly during Wednesday’s trading, but still held near 20-year highs.
Dollar reacts to ECB restrictions
The dollar traded at only slightly weaker levels against the euro on Wednesday than seen in the previous week. It also weakened against a basket of six major world currencies, by 0.1 percent. Again, the dollar is holding near a 20-year high.
The US currency was probably partly influenced by the repeated voices of the European Central Bank, which in recent weeks has increasingly shown its willingness to fight inflation vigorously by raising interest rates. This was beyond the originally expected monetary restriction.
Investors consider where to leave their money
Investors are thus reacting by slightly shifting assets from the US dollar to the euro. However, this may be only a short-term fluctuation caused by the current mood on the markets. In the long run, however, the dollar represents a more attractive way to value your investments. If only because the US is likely to tame inflation sooner than the euro area.
