The European Union (EU) is a political union of 27 countries that agree to abide by certain rules and use the euro as currency. As with nearly all currencies, the euro is able to be converted to other currencies based upon the value of each currency being considered. Since the Euro is a major reserve currency, traded on the foreign exchange (forex) market, it is not pegged to the U.S. dollar; this creates value fluctuations relative to the economic circumstances in the EU and U.S.
Since the euro's launch on Jan. 1, 1999, it has spent less than two years valued at less than a dollar. The euro peaked on April 22, 2008, with an exchange rate of $1.60. High euro to dollar exchange rates mean that your dollar could purchase more in the European Union, while a low rate means you would purchase less there.
Here is a brief summary of how the euro is valued, with a run-down of the historical euro to dollar conversion rates to help you understand the relationship between the two currencies.
How the Exchange Rate Converts Euros to Dollars
The euro has a flexible exchange rate, which is dependent on three factors:
- The European Central Bank's benchmark interest rate
- The debt levels of individual countries within the EU
- The strength of the European economy
Based on these factors, forex traders influence whether the currency will increase in value or not. When European economic growth is strong or when interest rates are rising, odds are traders will predict an increase in value. They then begin to bid the price up in the hope that value will continue to increase.
Others may read the same data and decide that the value of the currencies will decline instead—these traders begin to bid the price down. This creates the fluctuation and complex interactions of buying and selling forex pairs (e.g., EUR/USD, USD/JPY) that determine a currency's price at any given moment.
Euro to Dollar Conversion: 2000–2010
2000–2002: The euro traded within a narrow range in its first two years, between $0.87 and $0.99. It seldom broke above a dollar, until it was officially launched as a currency. Until 2002, it was used only for electronic transactions.
2002–2008: The euro rose by 63% in just six years. During the same period, the U.S. debt grew by 60%. On Jan. 1, 2002, a euro was worth a little more than $0.90. By the end of 2007, though, its value had skyrocketed to $1.46.
2008: The euro started the year at $1.47. Investors remained confident that the subprime mortgage crisis would be confined for the most part to the United States. This led to the euro’s strength until investors realized that the recession was going to be global, causing the euro to fall to $1.39.
2009: The euro started the year in a strong position, at $1.40, then fell to the year's low of $1.25 as the European Central Bank (ECB) increased its benchmark interest rate to 1.5%. This time, investors were concerned that the ECB was too hasty in raising rates, which thwarted any chance of an economic recovery in Europe. The risk of renewing a recession offset the possibility of a higher return in holding euros, euro-denominated bonds or investments.
The ECB realized that its strategy had backfired and began lowering its prime rate. As a result, the euro’s value rose by 20% between March 3 and Dec. 1. In addition, investors' fears of the $13 trillion U.S. debt caused them to flee the dollar and dollar-denominated bonds. By the end of 2009, the euro was worth $1.43.
2010: The euro started the year at $1.44. It dropped by 17% against the dollar, hitting a low of $1.20 on June 10. Investors became worried about the weakness of the EU's economy, but the euro rose to $1.42 by November, when the EU economy showed renewed signs of strength. This confidence didn't last long though, with the euro ending 2010 at $1.33.
Euro to Dollar Conversion: 2011–2015
2011: The euro started the year at $1.34, then rose to a high of $1.47 in July. This happened for two reasons—investors abandoned the dollar, thanks to the U.S. debt default crisis. At the same time, the ECB raised its key interest rate to 1.5%, which increased bank rates for anyone lending or saving in euros, thus raising the value of the currency itself.
As soon as the U.S. debt crisis was somewhat resolved, investors then fled the euro in response to a flare-up of the Greece debt crisis. This crisis created doubts over the EU's financial strength and the future viability of the euro itself. By October 2011, the euro's value had dropped to $1.33. It rose for a brief time as EU leaders met to resolve what had then become the eurozone crisis. By December, it was back to $1.30.
2012: The worsening eurozone crisis pummeled the euro. Many wondered whether the eurozone itself would survive. The euro started the year at $1.27, then rose to a brief high of $1.35 in February as investors were calmed by an intergovernmental treaty agreed to in December 2011.
In May, the euro plummeted to $1.24 as the Greek debt crisis worsened. The government was put on hold when neither party won enough votes to elect a president. The future of Greece's membership in the eurozone was uncertain until a pro-bailout president was elected on June 17.
The euro rose for a brief while to $1.27 on June 20. It fell back just as fast as the interest rates on Spanish and Italian bonds rose to an unsustainable 7%. By August 2, the euro was only worth $1.22. The crisis was soon averted and by Dec. 31 it had risen to $1.32.
2013: The euro started the year at $1.32. It strengthened to $1.40 by Feb. 1 in response to signs that the eurozone debt crisis was being addressed. Its strength could have hurt exports and the struggling EU economy. It fell a little in March to $1.30, though it recovered by November to $1.35. As the eurozone economy strengthened, so did the euro itself.
The ECB lowered its interest rate to 0.25% on Nov. 7, 2013, in response to fears of deflation. This drove the euro's value to $1.33. It ended the year up a bit at $1.38.
2014: The euro started the year at $1.38. It rose to a high for the year at $1.39 on May 7, 2014. As a crisis in Ukraine began to heat up, the euro fell once again. It remained above $1.30 until Sept. 4.
The Ukrainian crisis was caused by a split between political views to join the EU or merge with Russa.
When ECB Chair Mario Draghi announced that he would begin quantitative easing, the euro immediately dropped by 1% to $1.30. It fell to a two-year low of $1.25 in November, when the ECB announced that it would keep interest rates low. It then fell to $1.21 by the year's end on fears that Greece would drop out of the eurozone after its Jan. 28 presidential election.
2015: On Jan. 22, the euro fell to $1.12. This was because the ECB announced that it would purchase 60 billion in euro-denominated bonds each month starting in March. Quantitative easing boosted the EU's economy, which was struggling with a recession.
On March 12, 2015, the ECB started buying the bonds. The euro fell to a 12-year low of $1.05 on March 13. Throughout the summer of 2015, the euro rose to $1.10 as it appeared the economy was strengthening.
On October 31, the ECB announced that it would lower interest rates. It also said that Greek banks must raise $15.9 billion to cover bad debt. This put downward pressure on the euro as investors feared a revival of the Greek debt crisis. At the same time, the U.S. Federal Reserve raised the federal funds rate in December 2015. This action drove the euro down to $1.07.
On Nov. 13, 2015, terrorists attacked Paris. The euro fell further to $1.06 by Nov. 30. The attacks prompted a flight to safety toward the dollar, weakening the euro. It strengthened to $1.10 after the ECB announced that it would continue its quantitative easing program through to March 2017. The euro ended the year a little lower at $1.09.
In 2015, some analysts predicted the euro would fall to parity. If that happened, a euro would equal $1.
Euro to Dollar Conversion: 2016–2020
2016: On Jan.1, the euro was worth $1.08. It rose to $1.13 on Feb. 11, as the Dow fell into a stock market correction. It remained within that range until the United Kingdom voted to leave the European Union on June 24. The euro then fell to $1.11 the next day as traders predicted that the consequences of Brexit would weaken the European economy. On Monday, it fell to $1.10.
The markets calmed down after realizing that Brexit would take years. The euro rose to $1.13 on August 23, then fell to its 2016 low of $1.04 on Dec. 20. Italy's presidential election increased the risk that its banks would not regain their health lost in previous years. The euro rose to $1.06 by Dec. 30, 2016.
2017: The euro rallied 14% against the dollar. It was worth $1.05 on January 1. It remained between $1.05 and $1.09 until May. By Sept. 8, it strengthened to $1.20. Europe began looking like a stronger economic bet after investigations into the connections between President Donald Trump's administration and Russia worried investors. The euro fell to $1.16 after Germany's close election, then regained its strength, ending the year at $1.20.
The euro's value is affected by the many circumstances of its members. The policies of the United States influence the euro as well.
2018: On Jan.1, the euro was worth $1.20. It fell to $1.12 on March 27. Investors hoped the ECB would end its QE program and begin raising interest rates. The dollar fell against the euro as investors feared President Trump's tax plan would increase the U.S. debt. The confidence was short-lived as Italy's populist election results threatened the eurozone.
As a result, the euro fell to a low of $1.13 on August 15. It rose a little after a few months, ending the year at $1.14 on December 28.
2019: On Jan. 2, the euro was worth $1.14. It fell throughout the year as investors fled to the U.S. dollar, concerned about the decline of global trade due to Trump's trade war. By August 16, the euro had fallen to $1.11.
2020: On Jan. 1, the euro was valued at $1.12. By mid-March, it had fallen to $1.06. That's when Europe was hit hard by the coronavirus pandemic. By July, the United States had taken the lead while the eurozone's cases had declined. As a result, the euro rose to $1.18 by July 31.