Information on European Exchange Rates

Explanation of Exchange Rate

You have asked for the exchange rate between the United States dollar and a European currency for a given year or years. The exchange rate is the price of the U.S. dollar in terms of the foreign currency: the number of units of foreign currency that it took to buy one dollar, or that one obtains in exchange for one dollar. A higher exchange rate denotes a stronger dollar; the dollar has appreciated (gained value) compared to the foreign currency. For example, considering Austria, the dollar appreciates from K4.96 (4.96 kronen) in 1913 to K5.08 in 1914. A lower exchange rate denotes a weaker dollar; the dollar has depreciated (lost value) relative to the foreign currency. Again considering Austria, the dollar depreciates from S18.67 (18.67 shillings) in 1974 to S17.40 in 1975.

The importance of the exchange rate is that it enables conversion of a foreign price or value into dollars, and also a dollar price or value into the foreign currency. The foreign magnitude is divided by the exchange rate to obtain the dollar equivalent; because the inverse of the exchange rate is the number of dollars per unit of foreign currency. For example, for Austria in 1913, the inverse exchange rate, 1/K4.96 = $0.2016, is the number of dollars per kronen. An Austrian good that cost K100 in that year would also be worth K100 x $0.2016 = $20.16. Similarly, a dollar price or value can be expressed in Austrian currency by multiplying the dollar magnitude by the exchange rate.

Exchange-Market Instrument and Foreign Currencies

Underlying any exchange rate is a particular exchange-market instrument. Two such instruments pertain to the exchange-rate data presented here: the “sight” (or “demand”) bill of exchange, and the “cable transfer,” that yield the sight exchange rate and the cable rate, respectively.

Until World War I, by far the most important instrument in the US foreign-exchange market was the sterling (British pound) bill of exchange. Until 1913 the dollar-sterling exchange rate was not only the most pertinent but also the most available and most reliable. Therefore, for the pre-1913 period, only the exchange rate for the British pound is presented, and the data pertain to the sight bill. This meant that the buyer of British pounds in the American center (say, New York) paid in dollars immediately, but received the pounds only after shipping the bill across the Atlantic and “presenting” it in London. Until 1879, in fact, “time” bills were the basis of exchange transactions. For example, a 60-day bill would involve an additional 63-day lag before receiving pounds—60 days inherent in the bill itself plus three “days of grace.” The time-bill data (1791‑1878) are converted to a sight-bill basis by eliminating the interest-component associated with the additional lag beyond that for a hypothetical sight bill.

The British pound series for 1791-1912 is distinctive in its high quality. With rare exception (fourth quarter of 1833 and all of 1834), the data refer to actual and large-scale transactions rather than advertised, posted, or otherwise hypothetical exchange rates (the latter commonly recorded and quoted until the late nineteenth century). The city of quotation is Baltimore (1791-1829), Philadelphia (1929-1869), and New York (1870-1912).

Subsequently, the market became broader in traded currencies, and the cable transfer replaced the bill as the dominant exchange-market instrument. From 1913 onward, dollar exchange rates are presented for 17 currencies—all European currencies for which Federal Reserve publications provide at least one annual exchange-rate observation in the 1946-1999 period, and the data are market rates at New York. The countries may be divided as follows: Western Europe (Austria, Belgium, Denmark, France, Italy, Netherlands, Portugal, Spain, Switzerland), Southern Europe (Greece), Central Europe (Austria, Germany), Scandinavia (Finland, Norway, Sweden), and non-Continental countries (Ireland, United Kingdom).

The exchange-rate data for the United Kingdom (Britain) from 1913 are for cable transfers, whereby pounds are received on the same day that dollar payment is made. By the year 1913, the difference between the sight and cable rate is so small as to be unimportant for most purposes. The exchange rates for the other European currencies are provided from this year (subject to data availability). These data also pertain to cable transfers, with the following exceptions: (1) 1913-1914: bankers' sight bills for all countries except France, Germany, and the United Kingdom; (2) 1915: bankers' sight bills for Austria and Norway; bankers' checks for Denmark, Spain, and Sweden.        

Underlying Frequency of Observations

The dollar-pound data for 1791-1912 are annual averages, covering as much of each year as possible, rather than pertaining to a specific day or month of the year. For 1870-1912, the data are annual averages of daily rates. For 1791-1869, the data are annual averages of quarterly values, these values derived as averages of all available intra‑quarterly observations. From 1913 onward, all the European series are annual averages of daily exchange rates in the New York market.

Changes in Currency Units

Of the 17 European countries, seven (Austria, Belgium, Finland, France, Germany, Greece, and Spain) experienced one or more changes in currency unit during the period spanning the observations for the country. The currency unit for the exchange rate in a given year is the unit in existence for that year. When a new currency unit is instituted at any time other than January 1, the exchange rate is expressed in the unit ruling during the greater part of the year; the full-year exchange rate experience is incorporated (data permitting), via conversion of the unit pertaining to the lesser part of the year. For example, the German monetary unit switched from the mark to the reichsmark on October 11, 1924. For most of 1924, the mark was the monetary unit; therefore the exchange rate is expressed as the number of mark per dollar. Specific changes in currency units for each country are as follows.

Austria: On December 20, 1924, the monetary unit of Austria was changed from the krone to the shilling, where 1 shilling = 10,000 kronen. Federal Reserve quotations switched from the krone to the shilling on March 13, 1925.  In 1947-1948 a new shilling was issued, where 1 new shilling = 3 old shillings. The exchange rate is expressed as kronen per dollar in 1913‑1924, old shillings per dollar in 1925-1938, and (new) shillings per dollar in 1953-1998.

Belgium:  On October 25, 1926, Belgium adopted a new monetary unit, the belga, for foreign‑exchange transactions, with 1 belga = 5 francs. Foreign-exchange transactions in terms of the belga ceased in 1940. After World War II, the belga was not restored. The exchange rate is expressed as francs per dollar in 1913-1926 and 1945-1998, belgas per dollar in 1927-1940.

Finland:  On January 1, 1963 the new markkaa replaced the old markkaa as the monetary unit of Finland, where 1 new markkaa = 100 old markkaa. The exchange rate is expressed as old markkaa per dollar in 1921-1941 and (new) markkaa per dollar in 1971-1998.

France:  On January 1, 1960 the new franc replaced the (old) franc as the monetary unit of France, where 1 new franc = 100 old francs. On January 1, 1963 the franc replaced the new franc as the monetary unit, where 1 franc = 1 new franc. The exchange rate is expressed as old francs per dollar in 1913-1959 and francs per dollar in 1960-1998.

Germany:  On October 11, 1924 the monetary unit of Germany was changed from the mark to the reichsmark, where 1 reichsmark = 1,000,000,000,000 mark. Federal Reserve quotations switched from the mark to the reichsmark on October 29, 1924. In June 1948 the monetary unit was changed to the deutsche mark, where 1 deutsche mark = 10 reichsmark. The exchange rate is expressed in mark per dollar in 1913-1924, reichsmark per dollar in 1925-1941, and deutsch mark per dollar in 1950-1998.

Greece:  In November 1944 the "new" drachma replaced the old drachma at the rate 1 "new" drachma = 50,000 million old drachmas.  In May 1954 an again new drachma became the monetary unit of Greece, where 1 (again new) drachma = 1000 "new" drachmas. The exchange rate is expressed in old drachmas per dollar in 1915-1940 and drachmas per dollar in 1982-1999.

Spain:  Federal Reserve quotations for the Loyalist peseta discontinued on January 25, 1939; quotations for the National peseta began on April 1, 1939. The exchange rate is expressed in Loyalist pesetas per dollar prior to 1939 and National pesetas per dollar thereafter.

Other Information

In some cases averages were calculated from data for only a portion of the year, or there was a change in the nature of the exchange rate (for example, between the official and free rate). For details, please see the source publications below.

When countries join the European Monetary Union, their individual currencies cease to exist and their bilateral dollar exchange rates are replaced by the euro/dollar exchange rate (not shown here, data on which begin in 1999). Thus the dollar exchange rates of the currencies of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Netherlands, Portugal, and Spain terminate with 1998, and the dollar exchange rate of Greece ends with 2000.

Sources

The source for the European exchange-rate series is Lawrence H. Officer, “Exchange Rates,” in Susan B. Carter, Scott S. Gartner, Michael Haines, Alan Olmstead, Richard Sutch, and Gavin Wright, eds., Historical Statistics of the United States, Millenial Edition, vol. 5 (New York: Cambridge University Press, 2006). Detailed information on the source data is in Lawrence H. Officer, Between the Dollar-Sterling Gold Points: Exchange Rates, Parity, and Market Behavior (Cambridge: Cambridge University Press, 1996), and publications of the Board of Governors of the Federal Reserve System: Banking and Monetary Statistics 1914-1941 (Washington, DC, 1943), Banking and Monetary Statistics 1941-1970 (Washington, DC, 1976), Annual Statistical Digest 1970-1979 (Washington, DC, 1981), and Federal Reserve Bulletin, various issues.

Information on changes in currency units is taken from the above Federal Reserve publications; William F. Spalding, Dictionary of the World's Currencies and Foreign Exchanges (London: Pitman, 1928); and B. R. Mitchell, European Historical Statistics 1750-1988 (New York: Stockton Press, 1992), p. vii.

Lawrence H. Officer
Professor of Economics
University of Illinois at Chicago