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What The Falling Euro Means For You
What The Falling Euro Means For You
Whether you're a savvy follower of currencies, or the mere thought of comparing dollars,
euros and yen gets your head spinning, changes in the relative value of money around the
world affect nearly all of us, wherever we live and whatever kind of money we spend.
Today we'll look at why the euro has been tumbling, and how you might notice the fall in
your everyday life, whether you're a global investor, a traveler or just an opportunistic
shopper.
While an agreement has been reached to provide emergency loans to Greece from the
European Central Bank and Greece's healthier neighbors, fears over the euro don't end
there. Spain and Portugal could become Greece-like situations later this year. And several
other countries aren't meeting the minimum standards set up by the European Central Bank
to be part of the Eurozone in the first place.
So the euro sickness isn't contained, and good medicine is in short supply given that the
global economy is still in the baby steps of recovery. Some nations, like Germany, are
relatively healthy, but should they drag themselves down to help their neighbors? It's
leading some investors to wonder if the euro will even survive as a standalone currency,
which only precipitates more down sliding in the euro's worth versus other currencies.
Many European retailers are hip to the game and have been posting the dollar-equivalent
prices for goods in their stores to appeal to American shoppers. Because currency moves
can happen fast (even mid-vacation), consider converting a small amount of cash when you
arrive, then using a major credit card when you can during the trip. Vendors like Visa and
MasterCard typically provide real-time conversions at the point of sale, so if the euro
continues to fall while you're there, you can take advantage right away.
European investors, their purchasing power plummeting, are buying less of everything -
fewer stocks, fewer commodities and fewer bonds. This will drag down the stock of any
U.S. company that does business in Europe, and can strike fear in global stock indexes, as
evidenced by the 990 point drop in the Dow late on Thursday.
If you invest in individual stocks, you can likely find out how the euro impacts your
favorite company by doing some quick research into the most recent quarterly report. Big
companies tend to provide investors with some commentary on how major currency trends
could impact the bottom line.
And if you use funds to access the market, chances are that the diversification you get will
outweigh any exposure to specific companies or world regions that could see further
slippage in the months ahead. This goes for euro-denominated bonds as well as foreign
stocks; both could see further declines if the euro mess continues.
SOURCE: Investopedía