The Euro Zone Crisis- reason for rising value of dollar Name: Arpit khosla Roll no.23 MBA-I-AVarious Euro zone states were particularly badly hit by the economic downturn .In 2009 alone, 14 Euro zone states breached European Union rules limiting public debt and annual budget deficits as defined by the Stability and Growth Pact (SGP).In the same year, Spains unemployment rate reached 19%,and its annual budget deficit grew to more than 11% of(GDP).Italys public debt reached 1.812 trillion in April 2010, its highest ever level .In response ,The Spanish Government proposed to cut public sector pay by 5%.Italys Government, introduced measures to reduce Italys budget deficit to 2.7% by 2012.In June 2010, Germanys Government also promised to reduce its public spending by 80 billion over the next 4 years. When the global economic crisis hit, Greeces public debt was predicted to rise to 124.9% of GDP (300 billion) during 2010, the highest level in the EU .The Greek Government also announced that its budget deficit would be equivalent to 12.7% of its GDP, more than 4 times higher than the maximum allowed under the EUs SGP. Also Greece needed to borrow 50 billion in 2010 just to service its debt, but banks and investors were worried that it might not be able to pay the money back. As a result, Greeces credit rating was downgraded, so it had to pay much higher interest on its borrowings than other Euro zone states. Greek Government promised to cut budget deficit to 8.7% of GDP during 2010. However, despite these proposal ,The countrys credit rating was repeatedly downgraded, eventually reaching junk-status. On other hand few reasons for Rise of the U.S. Dollar .In 2014 US economic growth was 5%. With strong economic growth, unemployment has fallen to 5.9%. This is in marked contrast to the rest of the developed world Euro zones unemployment level was at a record 17% and the GDP growth has contracted for the sixth straight quarter. Despite strong economic growth, US inflation is still low at 1.3%, making US goods relatively competitive .One of the US main trading partners, the Eurozone is at a very different stage of the economic cycle. Falling oil prices have pushed the Eurozone into deflation, This is making the dollar more attractive than the Eurozone; the ongoing concerns over Eurozone debt is another factor which will encourage capital flows to the US .Inverse relationship between oil prices and dollar. As oil prices are priced in dollars. Falling oil prices often lead to a rise in the US dollar. Countries have started introducing monetary stimulus to escape from recession inviting deflation, which in turn was affecting their currency. The economic growth of countries has started slowing as their manufacturing activities and factory outputs are declining gradually. The European Central Bank has decreased interest rates to record lows but the measure has hardly affected the economic growth. Deflation and fiscal deficits will soon creep in, making things worse for the Euro currency As 1 Euro was worth $1.38 in May 2014, but has now has the Euro has fallen to $1.175 (Jan 8, 2015) .