Euro Defies Gravity Against U.S. Dollar

Rising regional currencies keep euro exporters afloat. An exchange rate chart tracks the U.S. dollar against the euro, Swiss franc, Swedish krona and Danish krone from July 2010 to April 2011.


Euro notes sit on display in Paris, France, on Monday, April 27, 2009. German Finance Minister Peer Steinbrueck said that the euro region “must and would” act in concert to maintain the stability of the single currency if it were at risk in the financial crisis. Photographer: Alastair Miller/Bloomberg News


The euro seems not only to defy gravity, having risen steadily against the dollar, but to defy logic as well. It would seem quite logical that as the euro gains strength, euro-based exporters would feel the pinch of tightening competition.

Indeed, normally the appreciation of the 17-country currency prompts howls of protest from exporters, but not this year. The reason: While the euro has surged against the dollar, it has fallen against several core euro area competitors, notably the Swiss franc, the Swedish krona and the Danish krone.

That peculiarity means euro-based merchants still hold a small price advantage over exporters in northern and central Europe, and hence have suffered less than in previous years.