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The rise of the euro created a similar situation. The euro made
dramatic
gains against the U.S. dollar in 2002, 2003, and 2004, and
during that time
the value of the euro rose from about US$0.85 cents to above
US$1.35
(see Figure 2.2). Due to this shift in exchange rates, U.S.
citizens found
that vacationing in Europe became much more expensive, while
persons
visiting the United States from Europe found that their buying
power had
increased dramatically.
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This resulted in a huge influx of shoppers
from Europe visiting the
United States, especially around the Christmas holiday season.
One European
trader explained to me that it was less expensive for him to fly
to
New York City, stay in a hotel, shop, and return home than it
would be to
simply stay at home and shop.
While there can be no doubt that fortunes were made and lost on
the
huge movements described above, we will see how even a tiny move
in
exchange rates can result in substantial gains or losses. This
is how forex
traders make money. |
