The Impact of Euro Value on Trade Activities

How does the value of the euro affect trade activities between the United States and the European Union?

The value of the euro was $1.30 last week. During last week the euro depreciated by 5 percent. What is the value of the euro today?

a. ​$1.330

b. ​$1.235

c. ​$1.30

d. ​$1.365

Answer:

$1.235 is the value of the euro today. Imports into the United States from the European Union rise when the euro's value drops from $1.30 to $1.20.

The foreign exchange market is the place where currencies can be traded for one another. In other words, U.S. exports become more affordable merely as a result of changes in exchange rates when the dollar weakens. It's crucial to remember that a declining dollar may eventually result in more foreign corporations purchasing American commodities or goods.

Notwithstanding slight increases in the euro's value in 2016, 2017, 2018, and 2021, more depreciations in 2019, 2020, and 2022 also added to the currency's overall decline over that time.