Who's Monkeying with the Euro?

Monday, May 24, 2010 , , 0 Comments

 not real. for now.

Wild speculation just won't do in this case since I don't sleep with Jean-Claude Trichet and therefore can't translate the little dream bubbles floating above his bed as he snoozes.


The euro's recent rapid fall has not been sharp enough to trigger official intervention, yet the fear that authorities may step in should be enough to scare off ultra-bears in a historically over stretched market.

The euro fell to four-year lows of $1.2142 last week and has lost more than 13 percent since January.

Many investors doubt the fall has been "disorderly" -- central-bank speak for a disruptive move that would warrant intervention by authorities, who did not intervene even after a global rout following the collapse of Lehman Brothers.

Various long-term fair value analyses show the euro is still overvalued, while an export-friendly decline in the euro helps regional growth at a time of severe economic stress.

However, in a market where speculative bets against the euro are running at all-time highs, the shadow of the European Central Bank could be enough to encourage investors and traders to think twice before targeting a move beyond $1.20.

Indeed, the euro shot up 4 percent between Wednesday and Friday as investors grew worried it may have gone too far.

Intervention by Switzerland, which traders estimate to have bought 17 billion euros ($21.11 billion) on Wednesday to weaken the franc, and talk Australia may intervene to support the local currency, are also making investors nervous.

Now, let's think about that for a moment... the euro was in free-fall, the EU came out with a $1 trillion bailout slush fund that they haven't actually put together (a blank check does not a bailout make, especially if it's going to bounce when it's cashed) and everyone knows there's some serious bitchfighting going on in Europe over how and how much but suddenly the euro is not only better but way up? Yeah, ok, the ECB has absolutely nothing to do with it, I'm sure.

I don't have to sleep with Trichet to know he can't keep it up forever.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.