Tuesday, May 01, 2007
Euro hits record highs
The topics of today’s Blog are covered in LiveEcon:
Chapter 13 on exchange rates
Chapter 11 on monetary policy
The euro hit a record high against the dollar last week. The euro has reached its highest rate against the yen since the European currency was launched in 1999. The euro rose as high as 163.31 yen on expectations that the European Central Bank (ECB) would raise its interest rates in the coming months. There were further signs of strength in the euro zone in German unemployment figures. Headline unadjusted unemployment fell to 3.967 million in April - the lowest for more than four years The euro also hit a record high against the US dollar last Friday after disappointing figures for US growth.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6610511.stm
As unemployment falls and inflation rises, the anticipation is that central banks will begin to consider increasing interest rates. Higher interest rates in comparison to other countries will tend to lead to an improvement in the capital account and balance of payments surplus. In turn, this will tend to cause the exchange rate to appreciate (the exchange rate will "stengthen" - but of course this means that the country's exports will become less competitive). This appears to be happening in the eurozone viz a viz both the US and Japan at present.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For example, Chapter 13 examines the way exchange rates work, while chapter 11 examines the effect of monetary policy. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The topics of today’s Blog are covered in LiveEcon:
Chapter 13 on exchange rates
Chapter 11 on monetary policy
The euro hit a record high against the dollar last week. The euro has reached its highest rate against the yen since the European currency was launched in 1999. The euro rose as high as 163.31 yen on expectations that the European Central Bank (ECB) would raise its interest rates in the coming months. There were further signs of strength in the euro zone in German unemployment figures. Headline unadjusted unemployment fell to 3.967 million in April - the lowest for more than four years The euro also hit a record high against the US dollar last Friday after disappointing figures for US growth.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6610511.stm
As unemployment falls and inflation rises, the anticipation is that central banks will begin to consider increasing interest rates. Higher interest rates in comparison to other countries will tend to lead to an improvement in the capital account and balance of payments surplus. In turn, this will tend to cause the exchange rate to appreciate (the exchange rate will "stengthen" - but of course this means that the country's exports will become less competitive). This appears to be happening in the eurozone viz a viz both the US and Japan at present.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For example, Chapter 13 examines the way exchange rates work, while chapter 11 examines the effect of monetary policy. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
# posted by Sam @ 18:05 
