A euro/dollar time travel using the iPhone

The introduction of a new iPhone is a nice occasion to look both back and forward with a currency look. Because then it quickly becomes apparent that a number of factors behind the appreciation of the dollar will also play a role in the future.

It's only a matter of time before the iPhone 12 hits stores. The screen of the device is made of an extremely strong type of glass (ceramic shield) and the smartphone is ready for 5G. All modern gadgets stimulate the imagination: will there also be an unbreakable variant with a folding screen in a few years' time?

The introduction is of course also a good reason to look back at the foreign exchange market. It has been more than 12 years since the first iPhone appeared in the Netherlands. At the time you got about $1,50 for a euro, while it's less than $1,20 now. The world looked very different back then. The credit crisis had yet to really burn out and the heartbreaking loss in the 2010 World Cup final was still ahead.

Dollar rise: back to the future
Since the introduction of the first iPhone, the dollar has gained solid ground against the euro. Behind this rise are all kinds of factors. Two of these will continue to have a significant impact on the exchange rate fluctuations of the US currency in the future.

In the first place, this is the role of a safe harbor. As soon as uncertainty in the financial world increases, many parties opt for the predictability of the dollar. Given the dominant role of the currency in world trade, this role will not change for the time being.

Aging and growth
Another cause of the dollar's strength is the relatively high economic growth. This is partly due to a favorable demographic: the country has a relatively large and relatively young working population. Aging is an important reason why it is not possible to stimulate the economy in Europe a little more.

12 years ago, 194 million people were employed in the European Union. According to figures from employment agency Randstand, that number will fall to just over 160 million by 2050. With figures like this you don't need to be a clairvoyant to predict that the European growth rate will remain under pressure in the future.

Where is the dollar on the iPhone 20?
At the rate at which Apple designs new smartphones, the iPhone 20 will hit the market around 2028. Who knows, maybe I'll write that the American currency is even worth more than the euro. That's less strange than it seems. In fact, 20 years ago you only got $0,80 for every euro. The world of the iPhone 20 is still a long way off. Still, it doesn't hurt to look a little further ahead.

All the uncertainty surrounding the coronavirus, the American elections and Brexit make it difficult enough to look a few days ahead. Then it is nice to think that there are forces that ensure that the economy grows in the long term and that our lives become a little easier again. The new iPhone is a good proof of that.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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