Excerpts from Bloomberg:
Euro Proving No Reserve Asset as Central Banks Shift (Update3)
Feb. 1 (Bloomberg) -- Investors are pulling cash out of Europe at a record pace as central banks slow euro purchases, jeopardizing its status as a substitute to the dollar as the world’s reserve currency.
Last year, policy makers loaded up on euros, while analysts at Barclays Plc in London and Aletti Gestielle SGR SpA in Milan predicted central bankers would make good on threats to reduce the greenback’s dominance. Now the euro is down 8.1 percent since Nov. 25 in its fastest slide in 10 months amid concern that cash-strapped countries like Greece won’t pay their debts. Billionaire investor George Soros said Jan. 28 that there’s “no attractive alternative” to the dollar.
Traders have spurned European stocks in favor of shares elsewhere for a record 19 straight weeks, “clearly hurting” the currency by draining a net $13 billion from the market, said Geoffrey Yu, a UBS AG analyst. Investors are as bearish on the euro as they were when the 2008 financial crisis was pushing them to the dollar’s perceived safety, futures data show. After buying more euros than ever in 2009’s second quarter, central banks pared back, International Monetary Fund data show.
“The euro can fall further,” said Neil Mackinnon, a former U.K. Treasury official who is a London-based economist at VTB Capital Plc, the investment-banking unit of Russia’s second- biggest lender. “Sovereign-debt risk will continue to be a key theme,” he said. “The stresses created by the fiscal situation in Greece won’t go away quickly.”
Worst Since Inception
Without specifying a timeframe, Mackinnon predicted the euro will weaken to $1.20. If it finishes 2010 at that level, the year’s 16.2 percent loss would be the worst since the currency’s 1999 inception. The currency fell to an almost seven- month low of $1.3853 today, before trading at $1.3907 as of 4:44 p.m. in London.
In addition to concerns that the European Union will have to bail out Greece, speculation that growth will lag behind the U.S. and Japan and that the region’s debt load won’t return to pre-crisis levels for at least five years also are weighing down the euro, as well as assets denominated in the currency.
At last week’s annual World Economic Forum in Davos, Switzerland, New York University Professor Nouriel Roubini said Europe’s fiscal woes are creating “a rising risk” that its single-currency alliance will splinter.
Pessimistic Roubini
“Down the line, not this year or two years from now, we could have a breakup of the monetary union,” Roubini, who predicted the financial crisis a year before it began, said in a Bloomberg Radio interview on Jan. 26. Speaking to Bloomberg Television at the same event, Soros said the euro’s “problems” make it an unviable substitute reserve currency.
“Greece will not default; in the euro area, default does not exist,” European Monetary Affairs Commissioner Joaquin Almunia told Bloomberg Television on Jan. 29 at the Davos forum. The day before, Trichet said he’s “confident” that Greece will take the right steps to reduce its deficit.
All euro economies this year will breach the EU’s budget- deficit ceiling of 3 percent of gross domestic product, the commission predicts.
If continental authorities don’t “step up their efforts to restore confidence” soon, investors “could start questioning the long-term strength of the euro,” said Michiel de Bruin, who helps manage about $28 billion as head of European government bonds in Amsterdam for F&C Asset Management.
PW: I thought the bit about Greece not defaulting and that default does not exist quite amusing in a dark satirical sort of way.
Comments:
The Euro is in trouble.
Many of its members are running budget deficits on the order of 10% of GDP, much higher than the 3% limit set by the Maastricht treaty.
Will these budget rogues rein in their spending? At this point it seems unlikely.
The only country that seems to be taking substantial steps toward frugality is Spain.
Greece is a country will a history of defaults over the past 200 years.
We briefly examined the situation there is a recent post. Its All Greek To Me
We also believe that the English Pound is in great difficulty.
It is our view that a currency crisis in England could be the trigger for the next great global crisis.
We expect this would, at least temporarily, cause a run back to the US dollar.
This is not necessarily what the power elite want to see. For they wish to see a weak US dollar and the eventual introduction of a new global currency, perhaps based on SDRs (Special Drawing Rights) through the IMF.
One thing that is very clear, is that the elite do not like gold, after all, they can not easily control or manipulate it, and by extension, us.
Power Elite Agenda
Euro Proving No Reserve Asset as Central Banks Shift (Update3)
Feb. 1 (Bloomberg) -- Investors are pulling cash out of Europe at a record pace as central banks slow euro purchases, jeopardizing its status as a substitute to the dollar as the world’s reserve currency.
Last year, policy makers loaded up on euros, while analysts at Barclays Plc in London and Aletti Gestielle SGR SpA in Milan predicted central bankers would make good on threats to reduce the greenback’s dominance. Now the euro is down 8.1 percent since Nov. 25 in its fastest slide in 10 months amid concern that cash-strapped countries like Greece won’t pay their debts. Billionaire investor George Soros said Jan. 28 that there’s “no attractive alternative” to the dollar.
Traders have spurned European stocks in favor of shares elsewhere for a record 19 straight weeks, “clearly hurting” the currency by draining a net $13 billion from the market, said Geoffrey Yu, a UBS AG analyst. Investors are as bearish on the euro as they were when the 2008 financial crisis was pushing them to the dollar’s perceived safety, futures data show. After buying more euros than ever in 2009’s second quarter, central banks pared back, International Monetary Fund data show.
“The euro can fall further,” said Neil Mackinnon, a former U.K. Treasury official who is a London-based economist at VTB Capital Plc, the investment-banking unit of Russia’s second- biggest lender. “Sovereign-debt risk will continue to be a key theme,” he said. “The stresses created by the fiscal situation in Greece won’t go away quickly.”
Worst Since Inception
Without specifying a timeframe, Mackinnon predicted the euro will weaken to $1.20. If it finishes 2010 at that level, the year’s 16.2 percent loss would be the worst since the currency’s 1999 inception. The currency fell to an almost seven- month low of $1.3853 today, before trading at $1.3907 as of 4:44 p.m. in London.
In addition to concerns that the European Union will have to bail out Greece, speculation that growth will lag behind the U.S. and Japan and that the region’s debt load won’t return to pre-crisis levels for at least five years also are weighing down the euro, as well as assets denominated in the currency.
At last week’s annual World Economic Forum in Davos, Switzerland, New York University Professor Nouriel Roubini said Europe’s fiscal woes are creating “a rising risk” that its single-currency alliance will splinter.
Pessimistic Roubini
“Down the line, not this year or two years from now, we could have a breakup of the monetary union,” Roubini, who predicted the financial crisis a year before it began, said in a Bloomberg Radio interview on Jan. 26. Speaking to Bloomberg Television at the same event, Soros said the euro’s “problems” make it an unviable substitute reserve currency.
“Greece will not default; in the euro area, default does not exist,” European Monetary Affairs Commissioner Joaquin Almunia told Bloomberg Television on Jan. 29 at the Davos forum. The day before, Trichet said he’s “confident” that Greece will take the right steps to reduce its deficit.
All euro economies this year will breach the EU’s budget- deficit ceiling of 3 percent of gross domestic product, the commission predicts.
If continental authorities don’t “step up their efforts to restore confidence” soon, investors “could start questioning the long-term strength of the euro,” said Michiel de Bruin, who helps manage about $28 billion as head of European government bonds in Amsterdam for F&C Asset Management.
PW: I thought the bit about Greece not defaulting and that default does not exist quite amusing in a dark satirical sort of way.
Comments:
The Euro is in trouble.
Many of its members are running budget deficits on the order of 10% of GDP, much higher than the 3% limit set by the Maastricht treaty.
Will these budget rogues rein in their spending? At this point it seems unlikely.
The only country that seems to be taking substantial steps toward frugality is Spain.
Greece is a country will a history of defaults over the past 200 years.
We briefly examined the situation there is a recent post. Its All Greek To Me
We also believe that the English Pound is in great difficulty.
It is our view that a currency crisis in England could be the trigger for the next great global crisis.
We expect this would, at least temporarily, cause a run back to the US dollar.
This is not necessarily what the power elite want to see. For they wish to see a weak US dollar and the eventual introduction of a new global currency, perhaps based on SDRs (Special Drawing Rights) through the IMF.
One thing that is very clear, is that the elite do not like gold, after all, they can not easily control or manipulate it, and by extension, us.
Power Elite Agenda
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