From highs of 1.40 at the start of the year, and 1.46 towards the end of 2008, the single European currency has gradually weakened against the US dollar. In fact, during January the euro devalued by 9% against the greenback.

Following the turmoil within European financial markets after debt downgrades for Spain, Portugal and Greece, and with increased demand for the dollar as a safe-haven currency, the EUR/USD rate fell to 1.32 mid-January and to a two-month low of 1.275 at the close of the month.

Pricing stabilised during February, moving little more than 3 pips either way by 11 February. Although the euro hasn’t fallen further so far, it is still a far cry from the 1.58 level witnessed in July 2008. Depending on the extent of the ‘Obama bounce’, the use of the dollar as a safe haven and the impact of the US banking bail-out plan, it remains to be seen whether the dollar may strengthen further.

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