One of the more bizarre aspects of the euro zone crisis is that the currency in question — the euro — has actually not had that bad a year, certainly against the dollar. Even with Greece on the brink and Italy sending ripples of fear across financial markets, the single currency is still up 1.4 percent against the greenback for the year to date.
There are lots of reasons for this. The dollar is subject to its country’s own debt crisis, negligible interest rates and various forms of quantitative easing money printing — all of which weaken FX demand. There is also some evidence that euro investors are bring their money home, as the super-low yields on 10-year German bonds attest.
Goldman Sachs researchers have been hitting the history books again, trying to divine what happens to currencies when economies stagnate. Answer: Not as much as you might think
Looking at exchange rates for years before and during “stagnation”, Goldman found that year-to-year FX volatility in such periods is lower than in normal periods. But a lot of it depends on the type of stagnation.