An explanation for the depreciation of the dollar vis-à-vis the euro is that inflation in the United States is higher than in the euro area.

Question

Quizplus · Accepted Answer

Inflation can affect the exchange rate of a currency. When one country experiences higher inflation than another, their currency loses purchasing power, which can lead to a depreciation in the exchange rate. Therefore, if inflation in the United States is higher than in the euro area, it could contribute to the depreciation of the dollar vis-à-vis the euro.

An Explanation for the Depreciation of the Dollar Vis-à-Vis the Euro