• News
  • Celebrities
  • Finance
  • Crypto
  • Travel
  • Entertainment
  • Health
  • Others

The Eurozone's Cash Deficit Drives Demand For The Dollar

Banks in the Eurozone, flush with cash, are hurrying to convert their euros into dollars before the year is up, fueling demand for the dollar.

For three-month euro cross-currency basis swaps, the interest rates have deteriorated in recent weeks, with one side borrowing a currency and lending their own back. Traders in Europe pay a premium for exchanging surplus Euros into US Dollars due to the current volatility of the Euro.

What's The Cash Deficit About?

A surge of European Central Bank initiatives is partly to blame for the higher cost, economists and investors believe. Eurozone banks have been left with a surplus of cash as a result of the Covid-19 initiatives, which were designed to encourage lending to consumers and companies during the economic recovery.

Investment manager at Lombard Odier Investment Managers David Callahan said, "There's so much money and not enough investments to be made...

For a return of 0.05 percent, several Eurozone banks have decided to convert their euros into dollars and deposit the proceeds in the Federal Reserve's reverse repo program. There was a near-record amount of money flowing into the Fed's reverse repo program on Monday. After the Fed raised the return to 0.05 percent from 0 percent, money flowing into the facility has reached new highs this year.

More Cash To Dispose Of

Analysts estimate that banks have more cash on hand than in previous years. Targeted longer-term refinancing operations (TLTROs), as they are known at the European Central Bank, have encouraged banks to increase their borrowing from the central bank. The European Central Bank (ECB) slashed its lending interest rates to as low as -1% last year, meaning banks were compensated for borrowing.

To Mr. Callahan, this shows that banks don't want any more euros since the three-month Euribor rate has dropped to record lows in recent weeks, an indication that banks don't want additional euros on deposits. Analysts believe that the flow of money is a contributing element to the strength of the dollar and the weakening of the euro.

The Cost Of Exchange

Annually, the cost of exchanging euros for dollars rises. According to Jerôme Legras, head of research at Axiom Alternative Investments, it climbs at the end of every year because the Basel Committee on Banking Supervision, a group of global central bankers and regulators, determines the systemic importance of a bank by its year-end balance sheet.

After the new year, analysts predict that euro-to-dollar financing costs will drop. Short-term debt known as bills is likely to be more plentiful as a result of the Fed's projected tapering of its bond purchases, which will result in more locations for investors to store their surplus cash. An increase in the government's borrowing limit, or the debt ceiling, would make it possible to issue additional debt, boosting the market's supply.

As much surplus money as might be absorbed by Fed facilities and extra bill issuance will not be reduced in euro terms. There is no change in outstanding currency amounts when traders transfer currencies.

About The Authors

Alberto Thompson

Alberto Thompson - I live in Vancouver, Canada, and work as a web developer and graphic designer. Back end programming (PHP, Django/Python, Ruby on Rails) to front end engineering (HTML, CSS, and jQuery/Javascript), digital usability, user interface, and graphic design are all areas of web development where I spend my days. I'm a huge fan of web creation and design in all of its forms, as well as assisting small businesses and artisans with their online presence.

Recent Articles

  • Crypto Accessories Every Crypto Holder Should Know About

    Crypto Accessories Every Crypto Holder Should Know About

    These days, crypto accessories and gadgets can be found everywhere. There is a vast selection of products available for purchase, ranging from cryptocurrency wallets to devices that make buying and storing NFTs easier. If you enjoy cryptocurrencies and would like to own some, trade some, and play around with it, read on. These Bitcoin accessories will quickly become some of your favorite electronic gizmos.

  • MoviesCouch Hollywood Movies Download – Down, Down The Drain

    MoviesCouch Hollywood Movies Download – Down, Down The Drain

    It looks like one site will let down film lovers who used to frequent it for movies that they can download for free. If you’re looking for MoviesCouch Hollywood movies download, prepare to be disappointed.

  • Best Lotion For Jerking Off That Won't Damage Your Skin In 2022

    Best Lotion For Jerking Off That Won't Damage Your Skin In 2022

    Many people nowadays are looking for the best lotion for jerking off that will enhance their self-pleasure moments while not harming their skin.

  • Gerard Butler Net Worth - The Real Leonidas Of Sparta

    Gerard Butler Net Worth - The Real Leonidas Of Sparta

    The Scottish actor Gerard Butler net worth is $40 million. Gerard originally majored in law, but he gradually drifted toward acting and grew to be one of Hollywood's most known faces.

  • Keanu Reeves - $380 Mill Net Worth, Career, Earnings And Lifestyle In 2022

    Keanu Reeves - $380 Mill Net Worth, Career, Earnings And Lifestyle In 2022

    A musician, actor, producer, and philanthropist, Keanu Reeves net worth is $380 million. He has acted in scores of movies throughout the years, some of which have grossed billions of dollars at the box office. He is likely best known for the John Wick and The Matrix movie series.

  • MoviezAddiction.Website – Feeding People’s Craving For Films, TV Shows

    MoviezAddiction.Website – Feeding People’s Craving For Films, TV Shows

    Addicted to movies and TV shows? Not wanting to make you become more obsessed, but have you heard about MoviezAddiction.website, a source of thousands of films and shows you can download?

  • Can You Trust Rhino Air Hockey?

    Can You Trust Rhino Air Hockey?

    Work and family take up so much of our time these days that it's surprising how little time we have left for our enjoyment and fun. But just because we're adults doesn't mean we have to make our whole lives about work. You need to play Rhino Air Hockey Table to add joy to your life, relieve stress, and connect with other people and the world around you.

  • How Much Is A Mail Order Bride? Mail Order Bride Cost Estimated

    How Much Is A Mail Order Bride? Mail Order Bride Cost Estimated

    Interested in mail order bride pricing? Our estimations of mail order bride cost will help you on your quest for a foreign soulmate. Read this to learn more!

  • Head Of AmCham Guatemala Juan Pablo Carrasco De Groote: The “Art Of The Deal” (Guatemala-style)

    Head Of AmCham Guatemala Juan Pablo Carrasco De Groote: The “Art Of The Deal” (Guatemala-style)

    For over 10 years, the head of AmCham Guatemala has been Juan Pablo Carrasco de Groote – the unchanging face of the chamber of commerce.