INDEX

1. INTRODUCTION...................................................................................................................
2. DOLLAR ANALYSIS???????????????????????????
3. EURO EVOLUTION???????????????????????????.
3.1 Euro Depreciation 1999 ? 2002??????????????????????.
3.2 Euro Appreciation 2002 ? 2004??????????????????????
4.    SHORT TERM FORECASTING??????????????????????.
5. LONG TERM???????????????????????????????. FORECASTING??????????????????????????????.
5.1
5.2
6. HEDGING EXERCISE??????????????????????????..
7. CONCLUSION?????????????????????????????..
8. REFERENCES??????????????????????????????..

1. INTRODUCTION

On January 1, 1999 Euro became the currency for 11 member states of the European Union. Since then the Dollar-Euro exchange rate has completed a full turning. Euro depreciated since its introduction steadily and without any major interruption until February 2002. Then it began to rise against Dollar smoothly and reached a height of 0.74 Euros to 1 US$ in December 2004.

Three years of depreciation of the Euro followed by three years of appreciation without wild fluctuations asks for an explanation which would adequately account for the position of the Euro as an emerging international currency.

Dollar replaced its predecessor sterling already in the immediate post-war years as the dominant world money and is today the leading international currency with vast scale economies and externalities due to its long standing international monetary functions. The common European currency Euro is in the process of assuming an important role as an international currency.

This paperwork will expl ...