Down Goes the Euro!
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.”
Blame it on Greece, that's classy. Meanwhile the Euro could plummet to the lowest since its inception in 1999. Not only that but the price for sovereign debt default swaps are rising in Europe (amazing considering how awful the situation is here at home, eh kids?)
The cost of protecting $10 million in debt from 15 European governments for five years hit a record $91,060 a year last week, about double both September’s cost and the current price for insuring U.S. debt, data compiled by Bloomberg show. Prices for Portugal, Iceland, France, Greece and Germany swaps have risen the fastest in the world this year and are up about 55 percent on average, the data show. Greek debt insurance is now the developed world’s most expensive at almost $400,000.
“Greece is the catalyst, but it goes to the root of the entire structure of the euro,” said Adnan Akant, who helps oversee $39 billion as head of foreign exchange in New York at Fischer Francis Trees & Watts. “The U.S. and Asia are likely to outpace Europe in the economic recovery. That’s reason enough” to bet against the euro, he said.
Hahahahahahahaha LOL, did Mr Akant see Mr Obama's budget?