When the Euro Dollar came out how did people agree on it's worth?

Answer 1

Alex my friend, the first part of your essay is correct, but the value was and still is set by the Euro zones central bank, based on the value of assets held. Somewhere in this URL it should explain it:

http://dsbb.imf.org/Applications/web/reservestemplate/

If not do a search on the BIS {Bank for International Settlements.} A very lengthy read but somewhere in the volumes of info it explains that Central banks set their own exchange rates.

Note: A separate currency market exists @ FOREX.
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[edit] To prove that Central banks set their own value exchange rates, ask yourself why the USA has/is pressure-ing China to devalue their currency, the Yuan.

Answer: Only the Central bank that issues the currency in question is allowed to set a value on it.

Answer 2

I don't think that any of the other answers has it right. When the Euro was introduced, they had to decide how many Euros a French frank would buy, an Italian lira would buy, a Dutch gilder, and so forth. This is because everyone had to change their old money into Euros at the official rate set for each country. But these rates had to be consistent with the previous exchange rates between the frank and the gilder or the mark and the frank. If not the trade between these countries would be disrupted since exports from one country would suddenly become more expensive while from another country exports would suddenly become less expensive. As an example, lets assume that the value of the Euro was set equal to six French franks. But if the exchange rate between the German mark and the frank had previously been two franks to the mark before the Euro, then the rate for the mark to the Euro had to be set at three marks for each Euro. In this way when a German traded with a Frenchman after the introduction of the Euro, relative prices for their exports did not change and trade could continue exactly as before.

Answer 3

Wow... That is the worst non-answer I have seen in a while. You didn't address what he asked at all!

The way the Euro value was determined (and it is "the Euro" not "the Euro dollar"), was that a few years before the Euro started circulating as a currency the European Central Bank was created (1999 & 2001 were the years I think, I know 1999 is right), and each of the Eurozone (what the ECB calls it) countries contributed to the reserves of the ECB. Based on this, the Euro was basically just a combination of each of the currencies of all the countries, but weighted based on how much each country contributed to the reserves (as it was not equal). From there, the Euro existed as just sort of theoretical for a while, so the markets could get used to it being around, and then eventually it was introduced as an actual currency, with the value that the market had determined by that time (and continues to change in small amounts, just like every currency).

Answer 4

'the people' you refer to were the banking and financial businesses that are located within the European Free Market and their concern was to unite the people to a common monetary standard .... there was great dissension with the money exchange values and it was a "financial decision" and not everyone agreed , but it seems to be working in the best interest of all the people .........