Can someone explain the Euro vs. U.S. Dollar?

Question

example - several weeks ago the Euro was 1.278. Today it is 1.329. Does that mean you get more Euro's per dollar - therefore the Euro is stronger than the dollar?

So if the dollar is weaker, does that mean that a manufacturer in Italy would need to charge more for their product to maintain the same level of profit if the base price was determined at the 1.28 level??

Answer 1

Yes that is exactly right!

Weeks ago $1USD = 1.278 Euros
Today $1USD = 1.329 Euros

That means today you get more euros for your 1 USD... =)

Answer 2

Wrong, it means you get more DOLLARS per EURO. The Euro has gone up relative to the dollar.

Edit - you're SORT OF on the right track with your example -- an Italian manufacturer would want to compensate for the fact that a product priced in same number of dollars, selling in America, would fetch fewer Euros and be less profitable at home (in Italy's Euro). If that's what you mean.

But that could go a couple of ways. An Italian exporter might insist on maintaining the same price in Euros. In which case the product would cost more in America in dollars, and likely lose market share to American competition. Or, perhaps more likely, the Italian firm would just eat it and the strong Euro would make its profits suffer.

But yes generally a weak currency helps that country's exporters by making their products cheaper abroad. Both China and Japan are often accused of manipulating their own currencies to keep them weaker than they should be, so as to stimulate exports. E.g., the idiot executives at General Motors and Ford truly believe that the only reason people buy Toyotas and Hondas is because the weak Yen makes them artificially cheap.

Answer 3

Last week it cost $1.278 to buy 1 Euro.

Today it costs $1.329 to buy 1 Euro.

The Euro has strengthened and the US dollar has weakened during this period because it now takes about 5 more US cents to buy 1 Euro than it did a week ago.