It’s the first step towards financial responsibility: “learning the value of a dollar.” But, any American who has traveled abroad knows that the value of a dollar is always changing. Currency exchange rates change daily, much like U.S. stock prices. Learning to understand and evaluate currency exchange rates can help you score the relative strength of national economies. For instance, when the Euro “strengthens” against the dollar, that means that a single Euro can buy you more dollars than it could have before it strengthened. In this scenario, analysts are saying that the fiscal viability of the European Union has increased relative to the U.S. economy. In this way, viewing currency markets is a quick way to gain an approximation of which countries are moving in the right direction, and which ones are moving in the wrong direction.
As rumors of a Greek default swirl, and turmoil in the European Central Bank becomes apparent, all eyes are turning towards Europe and the Euro. This also means that people are paying close attention to the exchange rate between a U.S. dollar and a Euro. The U.S. dollar and Euro exchange rate was actually considered one of the top performing exchange-traded funds of the first half of 2011 because of the gains made by the Euro. This was joined by the Dreyfus New Zealand dollar fund, and the CurrencyShares Swiss Franc Trust. How the dollar does in the short and longterm future will depend on what happens in foreign countries and by how Treasury notes hold up.
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