Exchange rates and interest rates

Data extracted in January 2023.

Planned article update: February 2024.

Highlights

Between 2012 and 2022, the euro depreciated overall by 12.7 % against the Chinese renminbi-yuan, 18.0 % against the United States dollar and by 16.6 % against the Swiss franc.

In 2022, the highest Maastricht criterion bond yields were recorded by Hungary (7.57 %), Romania (7.48 %) and Poland (6.05 %). The lowest yields were recorded in Lithuania (0.61 %).

Exchange rates against the euro, 2012–2022

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) (hereafter referred to as non-euro area Member States) and data for non-EU countries. This information is derived by converting data in national currencies to data in euro using exchange rates (EUR – see currency codes). As such, for most of the monetary 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-EU countries, in particular the United States dollar, Japanese yen, the (British) 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.

Full article

Exchange rates

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 2012 and 2022. The development of these exchange rates is also shown in the four different charts (Figures 1a–1d) that make up Figure 1, where the currencies are grouped together according to the magnitude of their various exchange rates against the euro. Non-euro area Member States 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. The current members of ERM II are Bulgaria (since 10 July 2020) and Denmark (since 1 January 1999). This article refers to data up to 2022 and therefore exchange rates for the Croatian kuna are still presented, although Croatia joined the euro area on 1 January 2023.

Table 1: Exchange rates against the euro, 2012–2022
(1 EUR = … national currency)
Source: Eurostat (ert_bil_eur_a) and (ert_h_eur_a), European Central Bank (ECB)

Focusing on the exchange rates of non-euro area Member States, between 2012 and 2022 the euro appreciated most strongly against the Hungarian forint (35.3 %), the Swedish krona (22.1 %), the Polish zloty (12.0 %) and the Romanian leu (10.6 %). The remaining non-euro area Member States experienced smaller changes in their exchange rates: the euro had an overall depreciation of 2.3 % against the Czech koruna and a depreciation of 0.1 % against the Danish krone. 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.

In Figure 1, exchange rates against the euro for 2012–2022 are shown for the countries listed in Table 1 (except the Bulgarian lev, which has been unchanged during the period under consideration). The countries are grouped in the different parts of the figure depending on their national currency’s exchange rate against the euro in 2022. Different scales are used for the y-axes in each part. A fall in the exchange rate shows an appreciation in the value of the national currency and a depreciation in the value of the euro.

Figure 1a shows the development of the euro against the (British) pound sterling (GBP), the Swiss franc (CHF), and the United States dollar (USD).

Overall, the euro appreciated 5.2 % against the pound sterling over the period 2012–2022. This change reflected falls in the value of the euro in 2014, 2015, 2019, 2021 and 2022, which collectively had a lower impact than the increases in the value of the euro in the other years. There was a particularly volatile period in 2015 and 2016, with a large depreciation of the euro against the pound sterling in 2015 (down 10.0 %) followed by a large appreciation in 2016 (up 12.9 %).

The euro depreciated 16.6 % against the Swiss franc between 2012 and 2022. The euro fluctuated slightly against the franc between 2012 and 2014, followed by a steep fall in 2015 (12.1 %). Despite modest appreciations in the value of the euro in 2016, 2017, 2018 and 2021, further depreciations in 2019, 2020 and 2022 also contributed to its overall depreciation over the period.

The euro depreciated 18.0 % against the United States dollar between 2012 and 2022. The exchange rate between the euro and the dollar followed a broadly similar development as that between the euro and the Swiss franc. Initially the euro appreciated slightly in 2013 and the exchange rate was almost unchanged in 2014. In 2015, there was a sharp depreciation in the value of the euro against the United States dollar (down 16.5 %). Thereafter, developments were again irregular, with the euro appreciating in 2017, 2018, 2020 and 2021, but depreciating in 2019 and notably in 2022 (down 11.0 %).

Figure 1a: Exchange rates against the euro, 2012–2022
(1 EUR = … national currency)
Source: Eurostat (ert_bil_eur_a), European Central Bank (ECB)

Figure 1b shows the development of the euro against the Polish zloty (PLN), the Romanian leu (RON), the Chinese renminbi-yuan (CNY), the Danish krone (DKK) and the Croatian kuna (HRK.

Between 2012 and 2022, the euro appreciated strongly against the Polish zloty, up 12.0 %. During the period under consideration, the euro was stable or appreciated against the zloty in all years except 2014 (down 0.3 %) and 2017 (down 2.4 %).

Similarly, the euro appreciated strongly against the Romanian leu, up 10.6 % between 2012 and 2022. The euro was stable or appreciated against the leu in all years except 2013 when there was a depreciation of 0.9 %.

Overall, the euro depreciated 12.7 % against the Chinese renminbi-yuan between 2012 and 2022. The euro depreciated strongly against the renminbi-yuan in 2015 (down 14.8 %) and 2022 (down 7.2 %) and more moderately in 2019 and 2021. In all other years, the euro appreciated against the Chinese renminbi-yuan.

Since 1 January 1999, Denmark has been a member of the ERM II. Its currency has been pegged to the euro with a band allowing fluctuation of +/- 2.25 %. Over the time period 2012–2022, there were only minor changes in this exchange rate, with increases or decreases of the euro in the range of -0.2 % to 0.2 % each year. Overall, the euro depreciated 0.1 % against the Danish krone.

From 10 July 2020 until the end of 2022, Croatia was a member of ERM II, with the Croatian kuna pegged to the euro. It joined the euro area on 1 January 2023 with a fixed rate of HRK 7.53450 = EUR 1. Over the time period 2012–2022 there were only minor changes in the exchange rate: overall, the euro appreciated 0.2 % against the Croatian kuna.

Figure 1b: Exchange rates against the euro, 2012–2022
(1 EUR = … national currency)
Source: Eurostat (ert_bil_eur_a) and (ert_h_eur_a), European Central Bank (ECB)

Figure 1c shows the development of the euro against the Norwegian krone (NOK), the Swedish krona (SEK), the Turkish lira (TRY) and the Czech koruna (CZK).

The euro appreciated 35.2 % against the Norwegian krone between 2012 and 2022. The euro’s developments against the Norwegian krone followed two distinct stages: the euro was stable or appreciated each year between 2012 and 2020 but depreciated in 2021 and again in 2022.

In a similar manner, the euro appreciated 22.1 % against the Swedish krona over the period 2012–2022. This reflected a slight depreciation in 2013, appreciation during all years from 2014 to 2019, then depreciation in 2020 and 2021, followed by appreciation in 2022.

Overall, the euro appreciated 652.5 % against the Turkish lira. There was a regular appreciation of the euro against the Turkish lira, with the euro appreciating every year between 2012 and 2022, most notably in 2022 (up 65.6 %).

The euro depreciated 2.3 % against the Czech koruna between 2012 and 2022. Although the overall change in the exchange rate between the euro and the koruna was relatively small, the rate fluctuated over the period under consideration. The euro appreciated most against the koruna in 2014 (up 6.0 %) and depreciated most in 2022 (down 4.2 %).

Figure 1c: Exchange rates against the euro, 2012–2022
(1 EUR = … national currency)
Source: Eurostat (ert_bil_eur_a), European Central Bank (ECB)

Figure 1d shows the development of the euro against the Macedonian denar (MKD), the Serbian dinar (RSD), the Albanian lek (ALL), the Japanese yen (JPY), the Icelandic króna (ISK) and the Hungarian forint (HUF).

During this period, there was little movement in the exchange rate between the euro and the Macedonian denar with an overall appreciation of the euro of 0.1 %. The Macedonian denar has been pegged (within a band of +/- 1 % of a central rate) against the euro since 2002.

Overall, the euro appreciated 3.8 % against the Serbian dinar between 2012 and 2022. Developments of the euro’s exchange rate against the Serbian dinar followed three stages: the euro was stable or appreciated between 2012 and 2016; the euro depreciated in 2017 and 2018; the euro depreciated slightly or was stable in the years from 2019 to 2022.

Between 2012 and 2022, a depreciation of the euro was observed against the Albanian lek (down 14.4 %). The euro depreciated most years, with slight appreciations in 2013 and 2020.

The euro appreciated by 34.7 % against the Japanese yen between 2012 and 2022. The exchange rate fluctuated on a broadly biannual basis over the period, with appreciations of the euro in 2013 and 2014, depreciations in 2015 and 2016, appreciations in 2017 and 2018, depreciations in 2019 and 2020, and appreciations in 2021 and 2022.

Over the period 2012–2022, the euro depreciated 11.5 % against the Icelandic króna. This reflected depreciations in two periods, from 2014 to 2017 as well as in 2021 and 2022. The euro appreciated in 2013 and from 2018 to 2020.

Among the national currencies of the EU Member States, the euro appreciated most strongly against the Hungarian forint (up 35.3 %). This overall appreciation was accumulated over most of the period, as the euro appreciated or remained stable against the forint every year apart from in 2017 (when it depreciated slightly, down 0.7 %).

Figure 1d: Exchange rates against the euro, 2012–2022
(1 EUR = … national currency)
Source: Eurostat (ert_bil_eur_a), European Central Bank (ECB)

Interest rates

EU (weighted) average bond yields (see the explanatory notes for more information) were higher in 2022 than they had been in 2017 (see Figure 2). In the EU, bond yields in 2022 (2.44 %) were 1.11 percentage points higher than they had been in 2017 (1.33 %). The change for the EA was somewhat smaller, as bond yields in 2017 (1.09 %) were 0.77 percentage points lower than in 2022 (1.86 %). In relative terms, bond yields in the EU were 1.8 times as high in 2022 as in 2017, while the corresponding ratio for the EA was 1.7 times as high.

Yields fell in four of the EU Member States for which data are available between 2017 and 2022 (no 2017 data are available for Estonia). The largest reduction (in percentage point terms) in bond yields between 2017 and 2022 was recorded for Greece (down 2.49 percentage points) which had previously been heavily impacted by the global financial and economic crisis and subsequent sovereign debt crisis; the high yields fell when the economic and financial situation stabilised. Smaller reductions – less than 1.0 percentage points – were observed in Portugal, Bulgaria and Croatia. Elsewhere, bond yields increased between 2017 and 2022. They increased most in Poland (up 2.63 percentage points), Czechia (up 3.35 percentage points), Romania (up 3.52 percentage points) and Hungary (up 4.61 percentage points).

Hungary (7.57 %), Romania (7.48 %), Poland (6.05 %) and Czechia (4.33 %) were the only EU Member States with bond yields that were above 4.00% in 2022. A total of 13 Member States had yields below 2.00 %, among which only Lithuania (0.61 %) had a yield below 1.00 %.

Figure 2: EMU convergence criterion bond yields (Maastricht criterion), 2017 and 2022
(%)
Source: Eurostat (tec00097)

Figures 3 and 4 show three-month interbank rates. 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 borrow and re-lend highly liquid assets between themselves.

In the EA, these rates peaked around 2007 or 2008. As such, Figure 3 shows a time series after they had already fallen at a rapid pace as the initial effects of the global financial and economic crisis eased. Interbank rates generally continued to fall thereafter, although at a more moderate pace.

During the period 2012–2016, interbank rates for the EA, the United Kingdom, Japan and the United States were consistently within the range of -1.00 to 1.00 %. In Japan and the EA, this was also the case for the whole of the time series shown in Figure 3, as well as for the United Kingdom from 2012 to 2021.

Average short-term interest rates (see the explanatory notes for more information) in the EA turned negative (-0.02 %) in 2015 and remained negative for the next six years; the 0.36 % rate recorded in 2022 was the first positive one since 2014. By contrast, the United States had an upturn in interbank rates, and rates rose for five consecutive years after 2014, climbing to reach 2.33 % in 2019. The rate in the United States fell sharply in 2020 (to 0.64 %) and fell further (to 0.16 %) in 2021 before rebounding in 2022 to 2.40 %, just above its 2019 level.

Figure 3: Short-term interest rates – three-month interbank rates (annual average), 2012–2022
(%)
Source: Eurostat (tec00035), European Central Bank (ECB)

Figure 4 shows the same rates in the same markets but supplemented by information pertaining to non-euro area Member States. Two of the interbank rates were discontinued during the period and therefore no data for 2022 were compiled for Bulgaria (the SOFIBOR was discontinued as of 01.07.2018) and Croatia (the ZIBOR was discontinued as of 01.01.2020); furthermore, Croatia joined the EA on 1 January 2023.

In the EA, the interbank rate rose from -0.33 % in 2017 to 0.36 % in 2022. Interbank rates were higher in 2022 than in 2017 for all non-euro area Member States for which data are available. As in the EA, Denmark and Sweden also reported negative rates in 2017 and relatively low positive rates in 2022. The percentage point increases between 2017 and 2022 in these two countries were notably smaller than in the other non-euro area Member States. In absolute terms, the largest increase among these Member States was in Hungary, up 9.75 percentage points from 0.22 % in 2017 to 9.97 % in 2022.

The annual average of three-month interbank rates of the United Kingdom and the United States also rose between 2017 and 2022. Both recorded positive rates in 2017 and in 2022, with rates increasing 1.66 percentage points in the United Kingdom and 1.14 percentage points in the United States. In Japan, interbank rates were just below zero (-0.02 %) in 2017 and in 2022.

Figure 4: Short-term interest rates – three-month interbank rates (annual average), 2017 and 2022
(%)
Source: Eurostat (tec00035) and (irt_st_m), European Central Bank (ECB)

Figure 5 shows the euro yield curve between 2012 and 2022 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 but fell thereafter. 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 %. This trend shifted rapidly in 2021: bonds with 17 or fewer years to maturity had negative yields while bonds with 30 years to maturity offered a yield of 0.15 %. This development continued in 2022, as positive yields were observed for bonds for all maturities (up to 30 years). The yield for bonds with 30 years to maturity was 1.40 %, the highest yield observed since 2014.

Figure 5: Euro yield curve, 2012–2022
(%)
Source: Eurostat (irt_euryld_a), European Central Bank (ECB)

Source data for tables and graphs

Exchange rates and interest rates: tables and figures

Data sources

Exchange rates

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

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.

Context

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 bilateral exchange rates and, therefore, aim 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, Lithuania on 1 January 2015 and Croatia on 1 January 2023, bringing the total number of countries using the euro as their common currency to 20.

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 that meets every six weeks 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.

Exchange rates and interest rates

Highlights

Exchange rates against the euro, 2012–2022

Full article

Exchange rates

Interest rates

Source data for tables and graphs

Data sources

Exchange rates

Interest rates

Context

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