Is The Euro Better Than The Dollar?

Is The Euro Better Than The Dollar?


Choosing a currency to save funds from inflation losses in the current economic situation is not at all a trivial task.

In a period of instability in the foreign exchange market, people who are accustomed to keeping money in dollars, euros or other currency, ask themselves the question - in what currency to keep their savings? This also applies to bank account holders and those who prefer to “keep their money in their socks” at home.

Many people prefer to keep their money in dollars - the most familiar and convenient currency for many people in many countries. Despite the fact that many experts predicted the dollar will lose its status as a world currency, since 2014 its exchange rate has not only grown and strengthened significantly - there are already predictions that the dollar will reach euro parity. However, it is worth remembering that many factors affect the exchange rate - the economic, political and social situation of the country, so the exchange rate will sometimes change completely unpredictably. Therefore, do not give in to panic and rush to exchange, as soon as the exchange rate swings in one direction or the other - by buying a currency at a high rate and selling it at a low rate, you can lose a significant part of your savings.

And yet you are not sure about the dollar. Then in what currency should you store your savings? Despite the fact that the euro is one of the youngest monetary units in the world, many depositors prefer to open deposits in the currency of the Old World. The euro exchange rate depends on the economies of the countries belonging to the European Union, and thanks to assistance to countries in a state of economic crisis (for example, Greece), the difficult situation of individual EU members does not significantly affect the position of the European currency. However, tightening US monetary policy and, on the contrary, the ECB's asset repurchase program may make the dollar a preferred currency for storing savings.

As mentioned above, you should not blindly trust the forecasts of experts. Private investors who do not understand what currencies to buy are advised to maintain a bivalent basket - to divide their savings in equal parts between euros and dollars, and if we are also talking about Russia, then rubles. This is especially recommended for those who do not plan to move abroad at all - this method allows you to save capital for a long time. If a person plans to relocate to one of the countries of the European Union or to the territory of the United States, then it is worth keeping most of it, for example, in dollars, leaving only 15-20 percent of the euro.

In what currency is it better to store savings

Consider a few of the most popular currencies that are spoken about when discussing how best to store savings.

Rubles

Yes, it will sound very strange, but another popular currency in which a large number of people keep money is the Russian currency.

Pros of keeping money in rubles.

  1. If you receive a salary in rubles and you will spend your savings in them, keeping your savings in national currency will save you from exchange losses.
  2. Ruble bank deposits have a higher percentage than foreign currency deposits. Despite the fact that the profitability of deposits in euros and dollars has recently increased, the Russian national currency still outperforms the foreign one in this matter.

Now let's talk about the cons of the ruble currency.

  1. The ruble is rather unstable in relation to the same dollar.
  2. The inflation rate in Russia has remained very high for quite a long time. In December 2017, the average rate on annual deposits for individuals was 5.38%, and the annual inflation rate was 2.5%, that is, the ruble depositor even managed to earn a little on the deposit. But in December 2015, the rate was 10.04%, and the annual inflation rate was 12.9%, and depositors not only did not increase, but even lost part of their savings.
The Central Bank of Russian Federation: Official exchange rates on selected date for RUB to EUR, RUB to USD, and more

Dollars

Pros of dollar currency:

  1. It is one of the most convertible currencies in the world, used in most transactions, and the main reserve currency for many central banks, which speaks in favor of the stability of the dollar.
  2. The dollar is weakly subject to inflation, and its value does not depend on momentary trends.

Cons of dollar currency:

  1. Loss of money when exchanging rubles into dollars, and then back.
  2. Procrastination if you want to transform savings into rubles and buy something with them. According to the law, you can simply come to the bank and exchange currency for an amount of no more than 40 thousand rubles. From 40 to 100 thousand rubles will have to be changed with a passport, and in order to exchange a larger amount, you already need to fill out a questionnaire, indicate the passport data, SNILS, TIN and not arouse suspicion from the security service.
  3. The dollar is the most counterfeit currency in the world, so there is a risk that some of the savings, if you keep dollars under your pillow, will turn out to be a pile of useless bills.
  4. There is a possibility of government restrictions on the use and exchange of currency.
  5. Quite low interest on deposits - 1.54% per annum for a deposit for 12 months.
The Federal Reserve - Foreign Exchange Rates – USD to EUR and more

Euro

Pros of the euro:

  1. The euro is quite stable, despite reports of the desire of some countries to leave the European Union and other unrest.
  2. In theory, the value of the euro does not depend on the state of the economy of one country. In practice, the situation is somewhat more complicated, since the stagnation of production in large states that are members of the European Union will certainly affect the stability of this currency. And yet, at the moment, the euro looks quite stable.

Cons of this currency:

  1. Discussion of withdrawal from the European Union in different countries is reflected in the stability of the currency.
  2. Despite the common currency, there is no general financial and tax regulation in the Eurozone.
  3. When exchanging, you can lose some of the money, and here the same laws apply, according to which the amount over 100 thousand rubles will have to be changed with a package of documents.
  4. The euro has a minimum deposit rate in the “ruble - dollar - euro” triad - 0.31% per annum for a 12-month deposit.
Euro foreign exchange reference rates - European Central Bank – EUR to USD and more

Exotic currencies

Some are considering investing in some exotic currency that is not as popular as the ruble, euro or dollar.

Pros of exotic currencies:

  1. Anyone who understands the issue and chooses the currency of a country with a stable economy, independent of the influence of other countries, will be able to reliably save their savings.

Cons of exotic currencies:

  1. If dollars and euros can be changed in almost any branch of the bank, then you will have to run for exotic currencies.
  2. It is difficult to find a place to store it: you either have to put the currency “under the mattress”, or take care of finding a bank abroad, since, for example, in Russia it will be extremely difficult to open such a deposit.
  3. People outside the financial sector will have to do a full-fledged currency research. So, the Chinese yuan looks promising: the country's economy is growing, the value of the currency is practically independent of the economic influence of other countries. On the other hand, the growth of the yuan is constrained by the state, which is not interested in strengthening the currency and the subsequent rise in labor costs. And the experience of other countries shows that artificial containment of growth often ends in the depreciation of money.
Example or exotic currency: check Euros to Polish Zlotys, or EUR to PLN

So in what currency should you keep your savings?

Despite the fact that the dollar and the euro have enough disadvantages, it is not the quantity but the quality of the arguments that should be considered, since stability is extremely important in this matter.

It is better to keep money in different currencies - dollars, euros and even in some cases in rubles. According to numerous experts, in the long-term calculation inflation will “eat up” not only ruble, but also foreign currency savings. Therefore, in addition to passive storage of currency, it is good to use other investment instruments.

But experts do not advise buying exotic currencies, especially for beginners in this business: the risk of an unprofitable transaction is too high.

Therefore, before buying any currency and keeping savings in it, it is necessary to study in more detail the issue in relation to each suitable currency, as well as study all the risks and be very careful in transactions related to currency and its exchange.






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