The euro has been on a rampage in recent weeks, soaring to a 14-month high against the dollar amid a calming of Europe’s financial crisis.
But many market participants think the move will soon run out of steam.
“I could imagine another 2 to 3 percent for the euro, but I don’t expect a continuous rally,” Joe Corbach, head of currencies at Swiss Global Asset Management, tells The Wall Street Journal.
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“We do not expect the euro to go beyond $1.40.”
The euro stood at $1.3554 early Monday, up from about $1.32 a year ago
The European Central Bank (ECB)’s quantitative easing that began last summer has played a big role in quelling the financial crisis and drawing investors to the euro. And while other central banks have stepped up their easing, the ECB has begun to reverse its own, according to The Journal.
But the currency’s strength means trouble for the continent’s exporters, so the ECB may feel pressure to act to halt the euro’s rise.
Moreover, the eurozone economy, which hasn’t grown since the third quarter of 2011, may remain in that state at least through early this year.
But for the short term, many currency traders are focusing on euro strength.
“The big trend of what’s happening is a gradual unwinding of bearish euro positioning over the last month or two,” Dan Dorrow, head of research at Faros Trading, tells Bloomberg. “That’s what’s been pushing up the currency a lot.”
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