Understanding the Euro Rate

Understanding the Euro Rate

Executive Summary about Euro Exchange Rates by Y. TildenTo Euro Exchange Rate

The Euro is the official currency of 13 countries in Europe. Finland, Italy, Austria, Belgium, Germany, Spain, Portugal, Slovenia, France, Greece, Ireland, Luxembourg and the Netherlands all use the Euro. There is approximately 610 billion Euros in circulation right now. That amounts to about $800 billion in USD.

The Euro rate ultimately affects a great deal of the foreign exchange, or forex, market. The economy of those 13 European countries serves as the main basis for the Euro rate. Negative factors such as war, drought and recession also affect the Euro rate. On the other hand, positive factors also affect the Euro rate which include an economic boom and lower interest rates.

Knowing the value of the Euro rate is vital if you are interested in or are planning to invest in the foreign exchange market. The foreign exchange market is the single most pervasive market in the world, and exists anywhere where people can exchange one nation’s currency for another nation’s currency.

Joining the Euro and the Side Affects On Cyprus Real Estate

Executive Summary about Euro Exchange Rates by Antonis Loizou

The first effect is that borrowing will become less expensive. The prevailing libor (Cy) rate of 4½% will become (Euro) 4%. Despite the fact that there is the expectation of increase of the Euro base rate, the difference is quite large and it is not expected that the Euro rate will reach shortly the 4½%. This will in turn encourage funds/individuals to increase demand for real estate, with positive effects on property values.

The deposit rate will be also reduced from the maximum 4.20% (Cy) to 3.70% (Euro) encouraging even further real estate investment and acquisitions. Considering that land shows a capital growth in Cyprus of around 10%-15% p.a. and buildings of around 5%-10% p.a., it will encourage spare cash holders to turn their interest more eagerly towards real estate. It will also discourage to an extent those who are in two minds, whether to buy or rent, especially bearing in mind that rental income is around 3%-5% on real estate value.

Potential purchasers (foreign) will be able to compare more easily Cyprus with other competitive countries, such as Spain, Portugal etc, with respect to its competitors in the Euro zone, making the decision easier, something again which might help the Cyprus market.

Having a single currency relating to exchange rate vis-à-vis money sent from abroad and money received in Cyprus (pensions etc), which often causes exchange rate problems, will not exist.

A point to be considered is the often fluctuation of the interest rate, which appears more often in the Euro zone, as opposed to Cyprus. The fluctuating rates, especially now with the inflationary pressures caused by oil prices, will add an uncertainty to the buyers, who will consider more carefully their finances.

The same, of course, goes for the developers, who need security of costs and we might find some extra cost added due to the higher risks involved by the developers in terms of borrowing costs. What we will find, especially for Cyprus, is the increasing competition from the Cypriot banks, who will now have available millions of pounds deposited in offshore/external accounts and which they are now not allowed to lend in Cyprus.