The euro is seen clocking up its biggest quarterly decline at the end of March since its launch in 1999—and could fall even further over the coming months.
The currency, which is used by the 19 countries in the euro zone, continued to decline on Tuesday, reaching $ 1.0718. It has fallen over 11 percent against the U.S. dollar since the start of the year, putting it on track for its steepest-ever quarterly decline.
The currency’s losses have been driven by the launch of the European Central (ECB)’s 1 trillion euro ($ 1.2 billion) quantitative easing program in March. Asset purchases by the ECB increase the supply of euros in the monetary system, pushing the currency’s price lower.
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But a weaker euro is not necessarily a bad thing. The central bank hopes that by keeping money “cheap” it will spur companies and individuals to spend and borrow more, spurring inflation from record lows. And a lower euro can also provide a boost to the region’s exporters, as it makes their products cheaper on the global market.
The euro has also been hit by expectations that the Federal Reserve could soon raise U.S. interest rates from record lows, which have pushed up the dollar.
Given the euro’s decline, pundits have been debating if—or when—it could reach parity with the U.S. dollar. This last occurred in 2002, and before that in 1999, at the launch of the euro.
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