Tags: euro | dollar | currency | safe

WSJ: Euro Is the 'Port in a Storm'

Tuesday, 18 Jun 2013 07:47 AM

By Michelle Smith

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Volatility has plagued the markets recently, but the euro has been an unlikely "port in the storm," according to The Wall Street Journal.

The euro, need anyone be reminded, is the shared currency that many experts predicted would crumble and fail. Even Oskar Lafontaine, the German finance minister who launched the currency, called to break it up.

“The economic situation is worsening from month to month, and unemployment has reached a level that puts democratic structures ever more in doubt," he said.

Declassified:
‘Financial War’ Could Wipe Out 50% of Your Wealth

"Hopes that the creation of the euro would force rational economic behavior on all sides were in vain," The Telegraph quoted him saying.

But the European crisis seems to have simmered down. The union and the currency are still in tact. Few are taking to the media to declare that implosions and breakups are on the verge of happening. And investors are increasingly viewing the euro as a safe bet again.

In fact, some investors are even seeking safety in the shared currency as they unwind bets on emerging markets and high-yielding assets and scurry to exit their carry trades, The Journal reported.

After witnessing record wagers that the euro would fall, it is actually the number of bearish bets against the currency that are tumbling. The Commodity Futures Trading Commission reported a 90 percent decline over the past two weeks.

The difference between the wagers on an advance of the euro versus a slide reveals the biggest two-week advance in bullish euro sentiment on record, Bloomberg noted.

The 17-nation bloc is expected to post a current account surplus this year of 1.7 percent of gross domestic product, whereas the United States is expected to post a 2.8 percent current account deficit, according to economists' estimates compiled by Bloomberg.

"They're dealing with the economy now" in Europe, Thanos Papasavvas, a strategist at Investec Asset Management, told The Journal. "It will take time, but it's stable, and I think if anything it's going to be surprising to the upside."

"It's hard to bet against the euro," Sam Katzman, chief investment officer for New York-based Constellation Wealth Advisors, told The Journal.

"Until we stop printing money in the U.S., or they start, the wind is at the back of the euro," he added.

The dollar started the week snapping a five-day losing streak, but the yen fell against 16 major currencies, according to Bloomberg. The greenback and the yen have been knocked around along with stocks and U.S. Treasurys as investors worry about future central bank policies and rising interest rates.

But the euro has been the calm currency among the crew, gaining about 4 percent against the dollar over the past four weeks, pushing toward a four month high.

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth

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