Currency exchange – Dollars vs. Euros

For many years, the US dollar has been the currency of choice, because the US itself has been the most powerful economy in the world. Countries holding foreign currency reserves have traditionally held mostly dollars because of the inherent strength of the currency. Exchange rates, affected by US economic problems, however, have reduced the appeal of the dollar and countries are seriously thinking about boosting their foreign reserves by holding another strong currency – the Euro.

Currency exchange – Euro strengthens over time

When the Euro was introduced, there was a fair amount of scepticism over its potential success and indeed for several years the Euro was a relatively weak currency. Today, however, it is used by 15 of the European Union member states, including Germany, France and Spain, and in 9 other European countries. This means that approximately 320 million people have the Euro as their base currency – making it potentially more powerful than the US dollar. The Euro is seen as a stable currency at present, where the dollar is not, and the percentage of Euros held as foreign reserves is climbing.

Euros for commodity pricing?

Currency exchange issues mean that the Euro is becoming an increasingly attractive option for many purposes. Foreign reserves is just one – where countries like to invest in strong and reliable currencies. The other area is commodities. The biggest commodities have historically been priced in dollars. Again, this is because the dollar was the currency of the most successful and powerful country. At present, the US economy is in difficulty and the dollar no longer represents the same wise investment that it once did. There's a possibility that some commodities may be priced in Euros instead, leading to a further strengthening of that currency and a falling level of confidence in the dollar. No country or business wants to see its assets or investments declining and where the dollar becomes weaker, those profits inevitably follow.

You may look at currency exchange issues and think that they just have relevancy to your holiday spending or your import/export costs but in fact a weakening dollar can have a world-wide impact and the USA's influence may decrease substantially if another currency such as the Euro becomes more commonplace in world economics.

Foreign Currency Exchange Ltd is a commercial currency brokerage based in the UK. We help thousands of clients move hundreds of million pounds across the globe every day. From large businesses to private individuals who wish to send regular payments abroad, you can save money by getting a better currency exchange rate than your bank. Foreign Currency Exchange buys currency at wholesale rates and can help you save money with our fast secure service. For more information contact us now, telephone +44 (0) 20 7989 0000 or email info@fcexchange.co.uk.