BLBG:Euro Will Fall to $1.20 on Debt Crisis, Funding Difficulties, Nordea Says
Investors should bet the euro will weaken against the dollar as European governments struggle to raise funds and leaders race to implement new budget rules, according to Nordea Bank AB.
Strategists including Jonas Thulin in Stockholm advised selling the 17-nation currency at $1.2779, and buying it back after it has depreciated to $1.20. Investors should exit the trade if the euro strengthens to $1.3820, they wrote.
“The question is not if you are bearish on the single currency, but rather, are you bearish enough?” the strategist wrote in a note sent to clients today.
The euro was little changed at $1.2769 at 7:03 a.m. in New York after declining to $1.2666 yesterday, the weakest level since September 2010. The shared currency last traded at $1.20 on June 10, 2010.
German Chancellor Angela Merkel and International Monetary Fund Managing Director Christine Lagarde meet in Berlin today as the region’s leaders endeavor to end the sovereign debt turmoil now in its third year.
Merkel said yesterday euro-area officials may complete a new budget rulebook by Jan. 30 and are considering accelerating capital contributions to the region’s bailout fund.
The “most difficult part” of the recent deal to bolster budget rules is implementation, the Nordea analysts wrote. Banks face short-term funding difficulties and euro-region nations have “vast redemption needs throughout the spring with borrowing costs staying elevated,” they said.
The euro will strengthen to $1.30 by year-end, according to a Bloomberg survey of financial analysts with the most recent forecasts given the heaviest weightings.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
