How to Invest in the Euro

The Euro is the consolidated European currency that first entered into accounting usage on Jan 1st, 1999. The euro denominated currency subsequently went into circulation within participating member countries of the European Union, or EU, three years later.

Those EU member countries that gave up their traditional national currencies in favor of adopting the Euro are known collectively as the Eurozone. Some of the most notable European currencies that were given up for the Euro were the German Deutschemark by Germany, the French Franc by France, the Italian Lira by Italy and the Greek Drachma by Greece.

Those interested in learning how to invest in the Euro have a variety of options available to them.
Most of these investment choices involve taking some form of foreign exchange exposure, although purchasing stocks, bonds or deposits denominated in Euros is another way to invest in the Euro. Also, many European stock markets now quote the stocks listed on their exchanges in Euros, making investing in the Euro easier than ever. One notable exception is the London Stock Exchange that still quotes British stock prices in Pound Sterling terms,.

For example, one way to invest in the Euro using a forex contract would involve opening up a forex trading account with an online forex broker so that the investor could purchase Euros and sell some other currency against it, since the Euro is actively traded against all major currencies. One popular possibility would be to invest in Euros versus the U.S. Dollar by taking a long position in the EUR/USD currency pair. Taking this position into their investment portfolio would generate profits for an investor if the Euro subsequently rose versus the U.S. Dollar in the foreign exchange market.

Nevertheless, investors need to understand that such a forex position could also accrue losses if the EUR/USD exchange rate were to fall.  As a result, some investors prefer to purchase a Euro call/U.S. Dollar put currency option or binary option so that the risk on their Euro investment is limited to the premium that they pay in advance.
By InvestorGuide Staff

Copyrighted 2020. Content published with author's permission.

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