Why is a euro close to a dollar?

As I write this post 1 US dollar = 0.9914 euros. For a moment on Thursday, July 14, 2022 the US dollar was slightly above to euro, where it hasn’t been in twenty years. The chart below is from xe.com (the URL gives a chart for the previous week).

chart of USD to EUR conversion rate, July 9 to 16, 2022

This has been in the news (NPR, AP, Reuters, NYT). Of course the barrier is only psychological. But is there some reason the euro is basically in the neighborhood of 1 US dollar? This is astoundingly hard to search for, even before EUR/USD parity cam into the news.

But it turns out there is. The euro is the successor to the European currency unit (ECU), which was a currency basket used internally by the European economic community. The ECU was in turn a successor to the European Unit of Account (EUA), which was defined in 1950 to be 0.888671 grams of gold, and was redefined in terms of a basket of European currencies in the seventies.

Seems like a strange number, 0.888671 grams of gold.

It’s 1/35 troy ounce. The US dollar, under the gold standard, was convertible to gold at $35 per troy ounce.

So basically the predecessor to the euro was defined to be worth one US dollar.

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