What Is the Euro to Dollar Conversion? Its History

Why This Is a Great Time for Americans to Visit Europe

exchanging dollar and euro
You can get a lot more euros for your dollar than you could a few years ago. Credit: sorbetto/Getty Images

Definition: The euro to U.S. dollar conversion tells you how many dollars the euro can buy according to its exchange rate. It compares the euro's value to the dollar's value.

The euro was worth $1.16 on July 25, 2017. That meant one euro could buy 16 cents more in goods and services than one dollar could. That's higher than the $1.05 it was on January 6, 2017. But it's still low compared to three years ago when it could buy $1.37.

That means your dollar can go further in the European Union than it could in 2014. That makes it a great time to take that European vacation.

How the Exchange Rate Converts Euros to Dollars

The euro has a flexible exchange rate. That means its exchange rate changes every day because it's traded on the foreign exchange market.

The euro's value depends on three factors. Most important is the European Central Bank's interest rate. Investors also take into account the debt levels of individual countries, such as Greece. Third is the strength of the European economy.

Based on these factors, forex traders decide whether they think the currency will increase in value. That happens when economic growth is strong or when interest rates are rising. These traders bid the price up. Other traders read the same data but decide the value of the currencies will decline. They bid the price down. The complex interaction of these factors determines the currency's price at any given moment.

 Despite this volatility, the EU allows the euro's value to be decided by the forex market. 

History of Euro to Dollar Conversion

2000 - 2002 - The euro traded in a narrow range, between $.87-.99, rarely breaking above a dollar, until it was officially launched as a currency. Until 2002, it was used only for electronic transactions.

(Source: Federal Reserve Bank, Historical Exchange Rates)  

2002 - 2008 - The euro rose 63 percent in just six years the U.S. debt grew 60 percent. In January 2002, a euro was worth a little more than $.90. By the end of 2007, its value had skyrocketed to $1.4718.

2008 - The euro started the year at $1.4738, since investors still thought the subprime mortgage crisis would be confined mostly to the U.S. However, as soon as they realized the recession was going global, the euro fell to $1.3919, as businesses hoarded dollars during the 2008 financial crisis.

2009 - The euro started the year in a strong position, at $1.3946. It then fell to the year's low of $1.2545 as the ECB increased its rate to 1.5 percent. This time, investors were concerned that the ECB was raising rates prematurely, heading off any chance of an economic recovery in Europe. The risk of renewing a recession offset the possibility of a higher return in holding euros, or euro-denominated bonds or investments.

The ECB realized its strategy backfired and began lowering its prime rate. As a result, the euro rose 20 percent (March 3 - December 1). Also, investors' fears about the (at that time) $13 trillion U.S. debt caused them to flee the dollar and dollar-denominated bonds.

By the end of 2009, the euro was worth $1.4332.

2010 - The euro started the year at $1.4419. It dropped 17 percent against the dollar, hitting a low of $1.20 on June 10. Investors were worried about the weakness of the EU's economy. It rose to $1.42 by November, as the EU economy showed renewed signs of strength. This confidence didn't last, and the euro ended 2010 at $1.3269.

2011 - The euro started the year at $1.3371. It rose to a high of $1.4675 in July, for two reasons. Investors left the dollar thanks to the U.S. debt default crisis. At the same time, the European Central Bank (ECB) raised its key interest rate to 1.5 percent. That 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.

That created doubts about the EU's financial strength and even the future viability of the euro itself. By October 2011, the euro's value had dropped to $1.3294. It rose briefly as EU leaders met to resolve what had now become the eurozone crisis, but by December, it was back to $1.33.

2012 - The worsening eurozone crisis pummeled the euro, as many wondered whether the eurozone itself would survive. The euro started the year at $1.274. It rose briefly to a high of $1.3452 in February, as investors were calmed by an intergovernmental treaty agreed to in December 2011.

In May, the euro plummeted to $1.2405 as the Greece 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 briefly to $1.27 on June 20. It fell immediately as the interest rates on Spanish and Italian bonds rose to the unsustainable 7 percent level. By August 2, the euro was only worth $1.2149. However, the crisis was averted, any by December 31, it had risen to $1.3186.

2013 - The euro started the year worth $1.3195. It strengthened to $1.396 by February 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 slightly in March, to $1.2990, but recovered by November to $1.35. As the eurozone economy strengthens, so will the euro itself. 

The ECB lowered its rate to 0.25 percent on November 7, 2013, in response to fears of deflation. That drove the euro's value to $1.33. It ended the year up a bit at $1.3779.

2014 - The euro started the year at $1.3767. It rose to a high for the year of $1.3931 on May 7, 2014. As the Ukraine crisis started to heat up, the euro began falling. It remained above $1.30 until September 4, after ECB Chair Mario Draghi announced he would begin QE.  The euro immediately dropped 1 percent, to $1.2954. It fell to a two-year low of $1.25 in November, when the ECB announced it would keep interest rates low. It fell to $1.21 by year's end on fears that Greece would drop out of the Eurozone after its January 28 presidential election. (Source: "Euro Tumbles to Nine-Year Low," The Wall Street Journal, January 6, 2014.)

2015 -  On January 22, 2015, the euro fell to $1.12. That's because the ECB announced it would purchase €60 billion in euro-denominated bonds each month starting in March. QE boosted the EU's economy, which struggled with recession. On March 12, 2015, the ECB started buying bonds. The euro fell to $1.0524 (a 12-year low) on March 13. Throughout the summer of 2015, the euro rose to $1.10 as it appeared the economy was strengthening.

On November 10, the ECB announced it would lower interest rates.  It also said that Greek banks must raise $16 billion to cover bad debt. That put downward pressure on the euro because investors feared a revival of the Greek debt crisis. At the same time the U.S. central bank, the Federal Reserve, raised the Fed funds rate in December 2015. That drove the euro down to $1.07. For more on how this works, see Why Is the Dollar So Strong Right Now?

On November 13, 2015, terrorists attacked Paris. The euro fell to $1.056 by November 30. The attacks initially prompted a flight to safety to the dollar, weakening the euro. It strengthened to $1.0986 after the European Central Bank announced it would continue its Quantitative Easing program into March 2016. The euro ended the year slightly lower, at $1.0903. (Source: "ECB Announces Further Stimulus Measures," New York Times, December 4, 2015)

Some analysts still predict the euro will fall to parity, which means it will equal one dollar. That's because traders use it as part of a profitable carry trade. They short the euro, which has a low interest rate, and use the funds to invest in British pounds, which pays a higher interest rate. (Source: The Daily Shot

2016 - On January 1, 2016, the euro was worth $1.08. It rose to $1.13 on February 11 as the Dow fell into a stock market correction. It remained in that range until Great Britain voted to leave the EU on June 24. The euro fell to $1.11 the next day since traders thought uncertainty surrounding the vote would weaken the European economy. On Monday, it fell to $1.10. Here are more Brexit Consequences.

Markets calmed down after realizing Brexit would take years. The euro rose to $1.1326 on August 23. It then fell to its 2016 low of $1.039 on December 20, 2016. Italy's presidential election increased risk that its banks would not return to health. 

2017 - The euro was worth $1.05 on January 1, 2017. It remained between that and $1.09 until May, when it strengthened. Europe began looking like a stronger economic bet after investigations into connections between President Trump's administration and Russia worried investors. (Source: "Dollar Slides to 6-Month Low as Geopolitics Weigh," MarketWatch, May 16, 2017.)