hr: Currency

This year the world watched as the euro made its rapid ascent above most other currencies, particularly the US dollar and the British pound.

This sudden escalation of the euro had actually gone beyond the tolerance threshold of $1.60. The past week, we see the dollar make a comeback that led many analysts to believe that the days of euro’s global dominance may be coming to an end - at least temporarily.

Photo Credit: tunguska
There are two important views behind this theory:

• The Federal Reserve Bank has taken the measure tightening things up and is probably close to the end of this cycle;
• the ECB, on the other hand, has just barely begun.

Forecasts have it that the seemingly invincible or recession-proof Euro-zone economy may very soon succumb to the credit crisis.

Analysts’ forecast would be for the EU to ease up on its monetary policy at a time when the US would be tightening theirs, such that it would serve to fill the void between the interest rate differential of these two economic zones.

This current interest rate gap, analysts believe, is the reason why the US dollar has weakened tremendously.

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