Recent price ranges in the non-continental currencies against the Dollar have been more modest than the Euro. The British Pound reached 1.5459, its lowest since June 12th; the Australian Dollar slipped to 1.0178 sustaining a five day low, as did the Canadian Dollar at 1.0210. The Swiss Franc reached 0.9797, an eighteen month low returning to December 2010.
When compared to its competition in the Australian, Swiss or Canadian economies, the American currency fares poorly. All three have healthier economic prospects, lower debt and for the Canadian and Australian economics strong connections to the higher growth emerging market nations. Switzerland, politically neutral and a financial haven from European turmoil is a singular case. Consequently the Dollar is trading at or near historic lows against these currencies.
Europe has been mired in its debt crisis for more than two years. The effect on the currency has been pronounced. But it is in the comparison between the middling performance of the Euro versus the Dollar, a currency with its own problems despite the boons of reserve and safe-haven status, with its collapse against the Australian Dollar, Swiss Franc and Canadian Dollar that the profound effect of the debt crisis is revealed.
The decade range for the Euro against the Dollar reached its apogee of denial at 1.6040 in summer of 2008 and the plumbed the depths in July 2002 at 0.8346, or more importantly at 1.1875 in June 2010, six months after the Greeks revealed their deficit deceit and inaugurated the debt crisis. At its current level of 1.2270 it is far closer to the low than the peak but, like the Sterling, the disabilities of the Dollar have kept it within its historical limits.
Compare this performance with the record of the Euro against the Australian Dollar, the Swiss France and the Canadian Dollar.
At the current rate of 1.2043 in Eur/Aud cross, the Euro buys almost the fewest number of Aussie Dollars on record. The absolute low of 1.2017 was on Thursday. The range has been from 2.1147 in October 2008 to Friday's bottom.
A similar situation applies for the Euro against the Swiss Franc and the Canadian Dollar. The Swiss almost reached parity with the Euro in August last year at 1.0070 and only the concerted intervention of the Swiss National Bank (SNB) to defend its stated upper limit of 1.2000 has kept the Swiss from appreciating further. Since the bank began defending that limit speculation into the Swiss Franc has essentially ceased. Notwithstanding the SNB’s success the Franc is trading at its effective historical peak against the Euro.
The same is true for the Canadian Dollar. The all-time high for the Northern Dollar or low for the Euro came two Junes ago at 1.2449. Friday's low at 1.2504 is little different.
I have often heard the comment that the European debt crisis cannot be as difficult or costly as portrayed by the pessimists just look at the Euro. Another version of that superficial analysis will ask, after reciting the obvious dangers of the debt crisis, why has the Euro performed relatively well against the Dollar? The answer to both questions is straightforward. The Dollar has its own problems regardless of its safety status that affects its value against the Euro. A more accurate version of the Dollar’s economic valuation apart from its reserve-safety feature is the comparison to the Australian and Canadian Dollars and the Swiss Franc.
If you seek to measure the cost to the Euro of the debt crisis just ask a European vacationing in Switzerland or Canada or Australia this summer.