With the start of the subprime financial crisis in August 2007, the dollar began an accelerated decline in value, falling by 9 percent against the euro. At that point, the financial crisis appeared to be only a U.S. problem. By mid-2008, however, the crisis spread to Europe. Discuss the reaction of the dollar to actions taken by European central banks in late 2008 to deal with the widening financial crisis?
In order to prevent further spread and thereafter to counteract the impacts of fall in value of the dollar and thus increased economic crisis to many parts of the Europe, The Eurosystem’s Monetary Policy Response was established. This policy come up with a way to both cutting policy interest rates and engaging in non-standard measures of monetary policy. Thus really assisted in the stabilization of the dollar in one way or the another and thus effects prevented.