The Collapse of the Euro Has No Effect On Parallel Markets

The exchange rate of the euro and the US dollar was almost equal, on Monday, for the first time in 20 years, as the European and American currencies’ rates became different by less than one cent.

The euro swung around $1,004 in the afternoon, down about 12% from its value since the beginning of the year, at a time when fears abound of an economic recession on the European continent due to high inflation rates and uncertainties about energy supplies due to the Russian-Ukrainian war.

Economist Ishak Kharchi told Echorouk that the decline in the European currency, the euro, against the US dollar is due to the continuation of the Russian-Ukrainian war that weakened the European Union, and increased the fear of investors who avoid investing their money in the region, “the drop in demand for the European currency led to a sharp decline in its value”, he added.

What makes matters worse, according to the expert, is the US Federal Bank which sought to raise interest rates on the dollar and encourage demand for it, which contributed to the dollar’s superiority compared to the euro.

“Today, it is not possible to anticipate that the euro price will remain low compared to the past, or that it will rise in the coming hours, considering that this is related to the European Bank’s efforts to revive the Euro, by raising interest rates, as if it does so, the euro will witness a recovery. This decline may continue for a long time, and it may decline more at any moment”, he asserted.

On the effects of the decline in the value of the euro, the expert explained that the repercussions will be witnessed by the euro area, which imports 60% of its needs in dollars, thus, the purchasing power there will witness a noticeable decrease, as for companies exporting in dollars, their sales will rebound.

Concerning Algeria, Ishak Kharshi explained that the impact may be slight through a slight decrease in the prices of products imported from Europe in US currency, that is, financed by foreign exchange reserves, and if these funds are transferred from the dinar to the euro, the prices of these products will not witness a decrease.

As for the possibility that the parallel market for hard currency in Algeria will be affected by the low price of the euro, the expert denied this hypothesis and said that it is impossible, as sales of hard currency in the parallel market in Algeria, in parallel markets or other black points, are subject to supply and demand and not to any other economic factors, and attributed the recent rise in the prices of hard currency to the Hajj season and the return of flights to what they were in the pre-Corona period.