Statue of the logo of the euro seen in Frankfurt (Photo: Reuters/Ralph Orlowski)
The euro fell until it reaches its minimum value against the dollar in nearly 14 years this Thursday (15), the day following the decision of the Federal Reserve (Fed) to raise the interest rate and the possibility of higher in 2017.
In the middle of the afternoon, the euro became worth$ 1,0398 in relation to the dollar, a floor which has not arrived since January 2003. On Wednesday (14), at 20h (brazil time zone), worth US$ 1,0533.
Front of the real, the euro was operating close to R$ 3.51, on the afternoon of Thursday. Since the beginning of the year, the european currency lost nearly 18% against the currency in brazil, which also appreciated against the dollar.
On the eve, the Central Bank of american raised the interest rate for the second time since 2008, by relying on the good economic prospects before the arrival of Donald Trump to the White House.
Also given to understand that you can repeat this movement at a more rapid rate in the coming year, to avoid the slowdown of the economy and to maintain inflation around its target of 3% annual.
“investors who had hoped an end-of-year quiet were surprised with the firmness of the message sent by the Fed. The interest rate increase was widely expected, but the agenda set for 2017 allows the dollar to achieve its biggest ceilings in 14 years”, commented the analyst Lukman Otunuga, of FXTM.
Divergence of policies
Unlike the Fed, the European Central Bank (ECB) maintains its policy of expansive asset purchase, after the last meeting of the governors of 8 December.
“The divergent policies of the ECB and the Fed causes us to draw closer to the levels of the parity euro-dollar,” said Michael Hewson, of CMC Markets, adding that the political instability in Europe and concerns about its banking sector may affect the european single currency in 2017.
The euro had already despencado after the resounding victory in Italy, on December 4, the “no” to the popular consultation on political reform. The outcome led, in the last week, to request the resignation of prime minister Matteo Renzi.
This event, five months after the victory in the referendum on the Brexit, has revealed the concern of the investors with the stability of Italy, the third economy in the euro zone, as well as its repercussions, in general, for the whole region.
the dynamics of The high dollar, especially after the election of Donald Trump, began in mid-2014. Since then, the dollar gained 25% against the euro.
this adds the yesterday’s decision of the Fed, which generated another “jump” of the north american currency. Since the victory of Trump, on 8 November, the dollar appreciated by 5.5% against the euro.
the strength of The dollar, also stimulated by the program of reactivation advertised by the next president, has the effect that the imported products will be cheaper, but u.s. exports will be more expensive and therefore less competitive.
In the past, the economy of the United States has resisted well to the periods of a strong dollar, in an economy that still has the consumer as its primary engine. This new high dollar can be more delicate, especially if you continue in 2017, as the economy of the United States exports more and more, says economist Joel Naroff.
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