Exchange rates and interest rates
Data extracted in April 2021.
Planned article update: February 2022.
Between 2010 and 2020 the euro depreciated overall by 12.2 % against the Chinese renminbi-yuan, 13.8 % against the United States dollar and by 22.4 % against the Swiss franc.
In 2020, the highest bond yields were recorded by Romania (3.89 %) and Hungary (2.22 %), while negative yields were recorded in 13 EU Member States, the largest in Germany (-0.51 %).
Exchange rates against the euro, 2010-2020
This article presents an analysis of exchange rates and interest rates, which are some of Eurostat’s most frequently updated statistics. It is important to note that practically all of Eurostat’s data in monetary terms are denominated in euro, including statistics for European Union (EU) Member States that are not part of the euro area (EA) and data for non-member countries. This information is derived by converting from data in national currencies to data in euro (EUR — see currency codes). As such, for most of the statistics that are released by Eurostat, it is necessary to bear in mind the possible effect of currency fluctuations when making comparisons across countries for indicators denominated in euro terms, in particular when analysing time series.
This article starts by considering the development of exchange rates across the EU, as well as exchange rate fluctuations between the euro and several currencies of non-member countries, in particular the United States dollar, Japanese yen, the United Kingdom’s pound sterling, Chinese renminbi-yuan and Swiss franc (all of which are important reserve currencies and/or commonly used for denominating international loans).
The second half of the article examines interest rates — in other words, the cost of lending/borrowing money. At the macroeconomic level, key interest rates are generally set by central banks, as a primary tool for monetary policy with the goal of maintaining price stability and controlling inflation.
Table 1 shows the annual average exchange rates between the euro and a selection of European currencies, as well as the Chinese renminbi-yuan, the Japanese yen and the United States dollar, between 2010 and 2020. The development of these exchange rates is also shown in the four different charts that make up Figure 1, where the currencies are grouped together according to the magnitude of their various exchange rates against the euro. Note that the exchange rates for currencies of EU Member States that do not use the euro are shown in different shades of blue. Among these, non-euro area members may fix their exchange rates against the euro as part of the exchange rate mechanism (ERM II) in preparation for joining the EA and this explains some of the very stable euro exchange rates: Bulgaria (since 10 July 2020), Denmark (since 1 January 1999) and Croatia (since 10 July 2020) are the current members of ERM II.
Focusing on the exchange rates of non-euro area Member States, between 2010 and 2020, the euro appreciated most strongly against the Hungarian forint (27.5 %), the Romanian leu (14.9 %), the Polish zloty (11.2 %) and the Swedish krona (9.9 %). Throughout the period 2010-2020 there were relatively small fluctuations in the exchange rates between the euro and the currencies of Czechia, Croatia and Denmark, with the overall appreciation of the euro 4.6 %, 3.4 % and 0.1 % respectively. The exchange rate between the euro and the Bulgarian lev was unchanged during the period under consideration as the lev has been pegged to the euro since its launch in 1999.
Figure 1 also shows the development of the euro against a number of European currencies of non-member countries. The euro depreciated at a rapid pace against the Swiss franc between 2010 and 2011, with a period of relative stability between 2011 and 2014. This resulted from the Swiss central bank introducing a minimum exchange rate of CHF 1.20 = EUR 1.00 in September 2011, effectively capping the Swiss franc’s appreciation. This minimum exchange rate was maintained until 15 January 2015: after its removal the Swiss franc appreciated 30 % in inter-day trading and the euro depreciated by 12.1 % in 2015. Despite a modest appreciation in the value of the euro in 2016, 2017 and 2018, the depreciations in 2019 and 2020 also contributed to an overall depreciation of the euro against the Swiss franc of 22.4 % between 2010 and 2020. A more modest depreciation of the euro over the same period (2010-2020) was observed against the Albanian lek (10.2 %). Between 2010 and 2020, the euro also depreciated against the Icelandic króna (which had been particularly impacted by events linked to the global financial and economic crisis); by 2020 the euro had depreciated 4.5 % against the Icelandic króna when compared with the situation in 2010.
Against the currencies of some of the other European countries shown in Figure 1 the euro appreciated between 2010 and 2020. During this period, there was little movement in the exchange rate between the euro and the Macedonian denar (overall appreciation of the euro of 0.3 %); the denar has been pegged (within a range of +/- 1 % of a central rate) against the euro since 2002 with the goal of achieving price stability. Developments against the Serbian dinar were in three stages: after depreciating slightly in 2011, the euro appreciated strongly in 2012 and was stable or appreciating in each of the next four years; this was followed by four years of the euro depreciating against the dinar. Overall, the euro appreciated by 14.1 %. In a similar vein, developments against the Norwegian krone were in two distinct stages: the euro depreciated in 2011 and 2012 before appreciating for the next eight years to finish with an overall appreciation of 34.0 % between 2010 and 2020. There was a more regular development against the Turkish lira, with the euro depreciating slightly in 2012 but appreciating every other year between 2010 and 2020. Overall, the euro appreciated 303.4 % against the Turkish lira.
Figure 1 also shows exchange rate developments for the pound sterling and three non-European reserve currencies, those of the United States, China and Japan. The overall appreciation (3.7 %) against the pound sterling reflected falls in the value of the euro in 2012, 2014, 2015 and 2019 which collectively were slightly less than the increases in the value of the euro in other years, in particular the large appreciation of the euro against the pound sterling in 2016. The exchange rate between the euro and the United States dollar initially fluctuated, with the euro appreciating in 2011 and 2013, but depreciating in 2012; the exchange rate was almost unchanged in 2014. In 2015, there was a considerably sharper depreciation in the value of the euro against the United States dollar (16.5 %). Thereafter, developments were again irregular, with the euro appreciating in 2017, 2018 and 2020, but depreciating in 2019. As a result, the euro depreciated by 13.8 % against the dollar between 2010 and 2020. There were two years of marked depreciation in the value of the euro compared with the Chinese renminbi-yuan during the most recent 10-year period, namely in 2012 and 2015, while the euro also depreciated, but only slightly, in 2019. In all other years between 2010 and 2020, the euro appreciated against the Chinese renminbi-yuan. Nevertheless, over the whole 10-year period the euro depreciated by 12.2 % against the Chinese currency. The developments of the euro against the Japanese yen display a pattern of appreciation alternating with depreciation every two years. There was a depreciation in the value of the euro compared with the Japanese yen in 2010 and 2011, followed by a stronger appreciation of the euro in 2013 and 2014. In 2015 and 2016, there were further depreciations in the value of the euro against the yen, followed by more modest appreciations in 2017 and 2018. Despite a further depreciation in the value of the euro in 2019 and a very slight depreciation in 2020, the euro appreciated by 4.8 % against the Japanese yen over the whole period from 2010 to 2020.
The overall pattern of bond yields for the EU (weighted) average was that yields were lower in 2020 than they had been in 2015; the earlier of these two periods was characterised by yields having been relatively high in some of the EU Member States due to issues linked to the financing of their sovereign debt (see Figure 2). In the EU, bond yields in 2015 (1.38 %) were 4.3 times as high as in 2020 (0.32 %). The change for the EA was even greater, as bond yields in 2015 (1.21 %) were 20.2 times as high as in 2020 (0.06 %). In absolute terms, bond yields in the EU fell by 1.06 percentage points between 2015 and 2020, while the corresponding change for the EA was a fall of 1.15 points.
Yields fell by more than 2.00 percentage points in 5 of the 26 EU Member States for which data are available (no 2015 data available for Estonia) between 2015 and 2020, and in most of the other cases they fell by 0.93-1.63 points. There was one exception where bond yields fell by a smaller amount: in Italy, they fell 0.54 points from 1.71 % in 2015 to 1.17 % in 2020. The largest reductions (in percentage point terms) in bond yields between 2015 and 2020 were recorded for Greece and Cyprus — both of which were heavily impacted by the global financial and economic crisis and subsequent sovereign debt crisis — as high yields were reduced as the economic and financial situation stabilised.
Romania (3.89 %) and Hungary (2.22 %) were the only EU Member States to record bond yields that were above 2.00 % in 2020. There were 21 Member States where yields were below 1.00 %, 13 of which had negative yields. The largest negative yields were in Denmark (-0.36 %), the Netherlands (-0.38 %), Luxembourg (-0.41 %) and Germany (-0.51 %).
Money market rates, also known as interbank rates, are interest rates used by banks for operations among themselves. In the money market, banks are able to trade their surpluses and deficits; Figures 3 and 4 show three-month interbank rates. In the EU, these rates peaked around 2007 or 2008 and so Figure 3 shows a time series after they had already fallen at a rapid pace between 2008 and 2010 as the effects of the global financial and economic crisis were felt. Interbank rates generally continued to fall thereafter, although at a much more moderate pace. During the whole of the period 2012-2016, interbank rates for the EA, the United Kingdom, Japan and the United States were consistently found within the range of -1.00 to +1.00 %; indeed, this was the case in Japan and the United Kingdom for the whole of the time series shown in Figure 3, as well as for the EA from 2012 to 2020. Average short-term interest rates in the EA turned negative (-0.02 %) in 2015 and this situation has remained each year since, with the rate in 2020 equal to -0.43 %. By contrast, there was an upturn in interbank rates in the United States, as rates rose for five consecutive years after 2014, climbing to reach 2.33 % in 2019, before dropping back strongly in 2020 to 0.64 %.
Figure 4 shows the same rates in the same markets, but is supplemented by information pertaining to all of the other EU Member States that are not in the EA. Although the most substantial falls in money market rates were often recorded in 2009 and 2010, interbank rates were still higher in 2015 (compared with 2020) for around half of these Member States. Nevertheless, Sweden, Czechia and Romania recorded higher rates in 2020 than in 2015. In the EA, the interbank rate fell from -0.02 % in 2015 to -0.43 % in 2020, while Denmark also reported negative rates in both years, with a fall from -0.12 % in 2015 to -0.24 % in 2020. The rates in Croatia (2019 data instead of 2020), Hungary and Poland were lower in 2020 than in 2015, but were positive in both years.
The annual average of three-month interbank rates in Japan was also just below zero (-0.07 %) in 2020, having been just above zero (0.09 %) in 2015. By contrast, the United Kingdom recorded positive rates in both years, but also with a fall from 0.57 % in 2015 to 0.29 % in 2020. The United States had a different development as, despite a large fall in 2020, its rate in 2020 (0.64 %) remained above that observed in 2015 (0.32 %).
Figure 5 shows the euro yield curve between 2010 and 2020 for central government bonds with various years remaining to maturity. Yields were relatively high just before the onset of the financial and economic crisis in 2008 and had already fallen to some extent by 2010 and continued to do so. Bond yields for almost all maturities fell most years through to a low in 2016 before increasing somewhat in 2017 and stabilising in 2018. However, in 2019 and again in 2020 yields were once more at historic lows for almost all maturities, the only exceptions being for one or two years to maturity. In 2020, bonds with 29 or fewer years to maturity had negative yields while bonds with 30 years to maturity offered a yield of just 0.01 %.
Source data for tables and graphs
Eurostat publishes a number of different datasets concerning exchange rates. Two main datasets can be distinguished, with statistics on:
- bilateral exchange rates between currencies, including some special conversion factors for countries that have adopted the euro;
- effective exchange rate indices.
Bilateral exchange rates are available with reference to the euro, although before 1999 they were given in relation to the European currency unit (ECU). The ECU ceased to exist on 1 January 1999 when it was replaced by the euro at an exchange rate of 1:1. From that date, the currencies of the EA became subdivisions of the euro at irrevocably fixed rates of conversion.
Daily exchange rates are available from 1974 onwards against a large number of currencies. These daily values are used to construct monthly and annual averages, which are based on business day rates; alternatively, month-end and year-end rates are also published. From 2010 onwards the official rate for the Icelandic króna (ISK) is shown for indicative purposes.
Interest rates provide information on the cost or price of borrowing, or the gain from lending. Traditionally, interest rates are expressed in annual percentage terms, although the period for lending/borrowing can be anything from overnight to a period of many years. Different types of interest rates are distinguished either by the period of lending/borrowing involved, or by the parties involved in the transaction (business, consumers, governments or interbank operations).
Long-term interest rates are one of the convergence criteria for European economic and monetary union (EMU). In order to comply, EU Member States need to demonstrate an average nominal long-term interest rate that does not exceed by more than 2 percentage points that of, at most, the three best-performing Member States. Long-term interest rates are based upon central government bond yields (or comparable securities), taking into account differences in national definitions, on the secondary market, gross of tax, with a residual maturity of around 10 years.
Eurostat also publishes a number of short-term interest rates, with different maturities (overnight, 1 to 12 months). A yield curve, also known as the term structure of interest rates, represents the relationship between market remuneration (interest) rates and the remaining time to maturity of government bonds.
Interest rates, inflation rates and exchange rates are highly linked: the interaction between these economic phenomena is often complicated by a range of additional factors such as levels of government debt, the sentiment of financial markets, terms of trade, political stability, and overall economic performance.
An exchange rate is the price or value of one currency in relation to another. Those countries with relatively stable and low inflation rates tend to display an appreciation in their currencies, as their purchasing power increases relative to other currencies, whereas higher inflation typically leads to a depreciation of the local currency. When the value of one currency appreciates against another, then that country’s exports become more expensive and its imports become cheaper.
Through using a common currency, the countries of the EA have removed exchange rates and, therefore, hope to benefit from the elimination of currency exchange costs, lower transaction costs and the promotion of trade and investment resulting from the scale of the EA market. Furthermore, the use of a single currency increases price transparency for consumers across the EA.
All economic and monetary union participants are eligible to adopt the euro. Aside from demonstrating two years of exchange rate stability (via membership of ERM II), those EU Member States aiming to join the EA also need to adhere to a number of additional criteria relating to interest rates, budget deficits, inflation rates, and debt-to-GDP ratios.
From 1 January 2002, euro notes and coins entered circulation in the EA, as 12 EU Member States — Belgium, Germany, Ireland, Greece, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland — adopted the euro as their common currency. Slovenia subsequently joined the EA at the start of 2007, and was followed by Cyprus and Malta on 1 January 2008, Slovakia on 1 January 2009, Estonia on 1 January 2011, Latvia on 1 January 2014 and Lithuania on 1 January 2015, bringing the total number of countries using the euro as their common currency to 19.
Central banks seek to exert influence over both inflation and exchange rates, through controlling monetary policy. Their main tool for this purpose is the setting of key interest rates. In joining the euro, each EU Member State agrees to allow the European Central Bank (ECB) to act as an independent authority responsible for maintaining price stability through the implementation of monetary policy. As of 1999, the ECB started to set benchmark interest rates and manage the EA’s foreign exchange reserves. The ECB has defined price stability as a year-on-year increase in the harmonised index of consumer prices (HICP) for the EA below, but close to, 2 % over the medium term (see the article on consumer prices — inflation and comparative price levels). Monetary policy decisions are taken by the ECB’s governing council which meets every six weeks (formerly every month) to analyse and assess economic and monetary developments and the risks to price stability and thereafter to decide upon the appropriate level of key interest rates.
Direct access to
- Eurostatistics — Data for short-term economic analysis — Issue No 4/2021
- Exchange rates (t_ert), see:
- ECU/EUR exchange rates versus national currencies (tec00033)
- Euro/national currency exchange rates (teimf200)
- Real effective exchange rate - 42 trading partners (teimf250)
- Interest rates (t_irt), see:
- Euro yield curve by maturity (1, 5 and 10 years) (teimf060)
- EMU convergence criterion series - annual data (tec00097)
- Long term government bond yields (teimf050)
- Day-to-day money market interest rates (teimf100)
- 3-month-interest rate (teimf040)
- Short-term interest rates: Day-to-day money rates (tec00034)
- Short-term interest rates: three-month interbank rates (tec00035)
- Exchange rates (ert), see:
- Bilateral exchange rates (ert_bil)
- Effective exchange rate indices (ert_eff)
- Exchange rates - historical data (ert_h)
- Interest rates (irt), see:
- Euro yield curves (irt_euryld)
- Long-term interest rates (irt_lt)
- Short-term interest rates (irt_st)
- Interest rates - historical data (irt_h)
- Euro/ECU exchange rates (ESMS metadata file — ert_bil_eur_esms)
- Conversion factors for euro fixed series into euro/ECU (ESMS metadata file — ert_bil_conv_esms)
- Effective exchange rate indices (ESMS metadata file — ert_eff_esms)
- Euro yield curves (ESMS metadata file — irt_euryld_esms)
- Government bond yields - 10 years' maturity (ESMS metadata file — irt_lt_gby10_esms)
- Maastricht criterion interest rates (ESMS metadata file — irt_lt_mcby_esms)
- Short-term interest rates (ESMS metadata file — irt_st_esms)
- Regulation (EC) No 2866/98 of 31 December 1998 on the conversion rates between the euro and the currencies of the Member States adopting the euro
- Summaries of EU Legislation: Conversion rates between national currencies and the euro