Berlin, 02 Feb. 2025 (Anadolu News)

When the euro was launched in 1999, €1 was equivalent to $1.17. By October 2000, it had depreciated to $0.83.

The currency gained value between 2002 and 2008, reaching a record high of $1.60 in 2008.

In 2022, global events such as the Russia-Ukraine war, the energy crisis, rising geopolitical risks, and the US Federal Reserve’s (Fed) hawkish policies caused the euro to lose 16% of its value against the dollar.

The Fed began increasing interest rates in March 2022, while the ECB delayed its first hike until July.

The ECB's aggressive stance in subsequent months helped the euro regain value against the dollar in 2023, marking its first annual recovery since 2020.

However, in November 2024, Donald Trump’s election win, tariff plans on EU goods, slower US interest rate cuts, and Europe’s weakening economy placed downward pressure on the euro-dollar parity.

Starting at 1.10 at the beginning of 2024, the euro stood at 1.04 by Dec. 31.

The currency is now just 3.84% away from falling to $1, a level last seen during the early 2000s and again amid the energy crisis following the Russia-Ukraine war.

International use

Despite being the second most-used reserve currency after the dollar, the euro’s global role has declined.

According to the International Monetary Fund (IMF), the euro accounted for 19.76% of global official foreign exchange reserves in 2024, down from 25% in 2003.

In global payments, the euro’s share dropped from over 24% in 2023 to 22.9% by October 2024.

Digital euro developments

The ECB is preparing to introduce a digital version of the euro to adapt to evolving financial landscapes. Efforts to create a “digital euro” began in 2021.

In November 2023, the ECB announced a two-year preparatory phase for exploring digital currency issuance.

Meanwhile, the EU is developing a regulatory framework to oversee the digital euro and define its legal foundations.

The digital euro, issued by the ECB as a central bank digital currency, will complement traditional cash and be available for public use.

It will maintain the same reliability, value, and stability as the physical euro.

A draft rulebook for its use is expected in early 2025. Once implemented, the digital euro will offer an alternative payment option across Europe, benefiting individuals and businesses alike.