Abstract
Greek debt crisis erupted in early 2010, the euro fell against the dollar all the way, the crisis broke out in Euro. During the same time, the dollar index rising up,until May 14, 2010, it has been over 86, causing for much concern.
With the change of dollar index and the euro against the U.S. dollar exchange rates, the global commodity prices and the global financial flows are affected.
This paper discusses the relationship of the dollar index and the euro against the U.S. dollar. Collecting historical data of dollar index, using GARCH models and software EVIEWS, it considers the dollar index in the period (January 4, 1999 - May 14, 2010) to show any regularity. Collecting historical data of EUR/USD,using ARCH model software EVIEWS, it analyzes the features of EUR/USD and finds out when the index will rise or decline. The paper uses the method of linear regression to analyze the actual trends of EUR/USD and U.S. dollar index and to study the relationship between them, and gets some conclusions.
Keywords: Dollar Index; Euro against the dollar; GARCH model; ARCH model; Linear regression analysis