Washington. The dollar strengthened so much that it almost reached parity with the euro for the first time in 20 years. This trend threatens to hurt American companies as their goods become more expensive for foreign buyers. If US exports weaken, so will the economy, which is already slowing.
However, there is a positive side to this for Americans: A stronger dollar means little relief from hyperinflation, Because the wide range of products imported into the United States — from cars and computers to toys and medical equipment — are becoming less expensive. A strong dollar also favors American tourists in Europe.
The dollar index, which measures the value of the US currency against a basket of six foreign currencies, has risen about 12% this year to its highest level in two decades. The value of the euro is just under $1.02.
The dollar’s rise is mainly due to the Federal Reserve raising interest rates more aggressively than central banks in other countries in an attempt to cool the highest inflation rate in four decades.
As interest rates rise, so does the yield on US Treasuries, attracting investors looking for higher yields than the rest of the world. The increased demand for dollar-denominated securities in turn boosts the value of the currency.
said Rubella Farooqi of the consulting firm Hay.
The euro has not fallen below the dollar since July 15, 2002. On that day, the euro quickly broke through parity as huge trade deficits and accounting scandals on Wall Street caused the US currency to plummet.
this year, The Euro weakened largely due to the growing fears of recession in Euro countries. The war in Ukraine inflated oil and gas prices, hurting European consumers and businesses.