Euro started as a concept in 1995. It became a currency in 1999. It became a hard currency in 2002mby replacing all the currencies of the constituent countries. All the countries involved tried to keep the currency strong, despite the inflation and budget deficits.There were complaints from the strong countries against the weaker ones. Many countries later joined Euro, and there are now 19 countries which use Euro as their currency. Here is an account of the rise and fall of Euro through time.
Euro was launched as an electronic currency and was used by banks and foreign exchange dealers. The local currency exchange rate if franc and others were fixed about Euro at that time. Euro began to fall in the international currency markets and was not able to compete with the dollar. This boosted the American economy and the stock market.
The European Central Bank asked for help from other banks when it touched its record low of $0.84. The central banks intervened to help.
After Bush had become President of the US, he faced the prospect of recession. Government officials declared that they would let the market forces decide the movement of the dollar. There were 13 interest rate cuts by the US central bank. The Federal Reserves made it less likely for investors to move money into US markets. So, the euro became stable and started increasing against the dollar.
Euro was launched as a cash currency. It was used by 300 million citizens of the eurozone. The US budget was increasing, and there was a trade deficit which caused concern on the international currency markets. Traders thought that investors might not want to finance the huge deficit by sending the money abroad. So, the dollar began to fall.
The ECB agreed to cut interest rate by 0.5%. This made Euro strong in the international market. The dollar recovered a bit after the intervention of the central bank.
Euro reached its record high against the dollar in December 2003. The weak Eurozone was not helped by the high Eurozone, making exports very expensive. The trade deficit made the US dollar weak.
These fluctuations in dollar-euro rate over the years led many economists to rethink whether to go for managed exchange rates or not.