Exchange rate euro will not return to its’ previous level ever?

The whole world is watching changes in the exchange rate euro / dollar

In brief: The euro exchange rate ceases to be such that in general be mapped. Analysts and currency experts have real headache and fortunes from coffee grounds.

Europe is in the very difficult position in the history of the European Union. The exchange rate euro became the most vulnerable throughout the existence of a single European currency. Euro drops every day, with the hopes of the rising euro has not. Today the Euro updated in relation to the dollar a historical low in the past year and a half, but just the beginning of the year the euro zone currency has lost in relation to leading world currencies over 13%. The sharp depreciation of the euro exchange began late last year. In Greece, came to power a new government, which reviewed almost all the economic indicators articulated by the previous government.

The result was drastically increased the budget deficit forecast for the country and reduced forecast for GDP growth rates. World markets have responded to this news is a sharp increase in borrowing costs for Greece, and the leading rating agencies almost immediately lowered the Greek credit rating. Then, for several months, the EU authorities in various ways, asserted that what is happening in Greece – are only temporary difficulties, and the Government of the EU was “ready at any moment to intervene in what is happening and help to Athens.” But the words were just words: ratings of Greece continued to decline, the Greek government bond yields continued to rise, while the euro update all new and new lows. The situation reached a critical point in mid-April: European statistical agency Eurostat revised its budget deficit of Greece in the last year from 12,9% to 13,6% of GDP. Updated data led to a sharp increase in profitability of Greek bonds and euro to fall to a mark 1.3 dollar / euros. As a result, Athens was forced to seek assistance from the European Union, which together with the IMF promised the country a loan of $ 100 billion. However, this failed to reassure participants of currency and financial market. The culmination of the crisis was an emergency meeting of European finance ministers, during which it was taken the unprecedented decision to create a pan-European crisis fund amounting to 750 billion dollars since the announcement of this plan the euro immediately jumped to 1.31 dollar / euro, recovering from 14-month low 1,25 Dolar. made a few days earlier.

The short growth of euro

However, the joy of European policymakers and investors was short-lived. Already one day after announcing a plan to create a crisis fund the euro continued to fall, resulting currency eurozone today for the first time in the past year and a half fell below the 1.25 dollar / euro. “The overall trend of the depreciation of the euro against other key currencies in the future 1-2 years will continue. Virtually all of the fundamental factors are directed against the single European currency”, – considers the head of the analytical department of “Arbat Capital Sergei Fundobny. Thus the expert stressed that even if an announced over the weekend European anti-crisis program to be successful and really will take off about sovereign defaults on the agenda, “a sharp decline in public expenditure in many Old World countries will have serious negative pressure on economic growth.” A similar view is held and the chief investment director of the Criminal Code “Gazprombank – Asset Management Andrew Zokin. According to him, today’s decline in the euro to below 1.25 dollar was largely due to the ending of euphoria and continuing pressure on the euro / dollar. “It should be noted that the euro on basic indicators on purchasing power parity against the dollar should be around 1,25 dollar / euro, so the pressure that had occurred was the kind of impetus to its cheaper,” – said the expert.

The current decline of the euro – is only the beginning

Meanwhile, forecasts of experts and market participants on further future euro-zone currencies disappointing. Most analysts interviewed said the continuation of the depreciation of the euro, but many expect the fall of the single European currency to the level of 1,10-1,15 dollar / euro by the end of the year. “The immediate goal for the pair euro / dollar is now a mark of 1.23 dollar / euro, corresponding to minima of the fall of 2008. However, the end of the year with a high probability we will meet at even lower levels, estimated in the range of 1,15-1,20 dollar / euro “, – said S. Fundobny. Falling to the level of 1.2 dollar / euro by year-end forecasts and A. Zokin. According to him, in the medium term we can expect a small rebound of the euro, but then the trend of weakening European currencies will continue. “Adopted by participating countries eurozone measures are large enough and far-reaching and solve a significant part of the problem. But from a fundamental point of view and from a speculative point of view of the European currency in the long run should remain at the level of which was made public,” – emphasizes the expert.

Ukrainian Globalist
2010-05-14 22:07, Currency news.

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