The Fall of the Euro

The Euro crisis has led to a good deal of upward pressure on currencies outside the Euro Area. Euro Area citizens have rushed to exchange their Euros for currencies considered to be safe havens, notably the United States dollar, the United Kingdom Pound, the Swiss Franc, the Swedish Krona  and Norwegian Krone..  The first chart shows the decline in the Euro in terms of the United States dollar since early May of 2011. Of the countries mentioned the US dollar has seen the greatest appreciation since early May, 2011 and August 10th of this year, namely 20.94%.

The first currency to feel the pressure from the flight of the Euro was the Swiss Franc.  However when the appreciation of the Swiss Franc threatened Switzerland's economy, the Swiss government capped the rise at 1.2 Swiss Francs to the Euro in September 2011, and held the appreciation in check.  Citizens of the Euro Area have subsequently exchanged their Euros for British Pounds. Swedish Kronas and Norwegian Krones.  The second chart shows the fall of the Euro in terms of the Swiss Franc and the U.K. Pound.  The appreciation of the Swiss France was limited to 6.36% while the Pound was up 14.69% between early May, 2011 and August 10th of this year..  With the U. K. economy slowing, the Pound has recently reversed it appreciation and is beginning to look less like a safe haven.  Sweden and Norway remain likely repositories for the Euros of those in the Euro Area looking for safe havens.  The third chart show the Euro relative to the Swedish Krona and the Norwegian Krone.  The Krona has appreciated 9.25% and the Krone, 10.43% from early May 2011 to August 10, 2012.

The fall of the Euro is not necessarily a bad thing for the Euro Area as it could improve the balance of trade in goods and services by leading to increased exports and lower imports...