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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: TobagoJack who wrote (63931)5/18/2005 2:56:35 AM
From: elmatador  Read Replies (1) of 74559
 
The euro has begun a long-term slide and could drop below a dollar within 18 months, according to a client note issued yesterday by Morgan Stanley.

Euro 'set to lose parity with dollar'
By Ambrose Evans-Pritchard (Filed: 18/05/2005)

The euro has begun a long-term slide and could drop below a dollar within 18 months, according to a client note issued yesterday by Morgan Stanley.



The report, entitled Seven Reasons to Sell the Euro, warns that slumping growth and political crisis have started to take their toll on the eurozone.

"We are now witnessing the beginning of a bearish trend. Parity with the dollar could be broken within the next 18 months," said the note, written by eurozone economist Joachim Fels.

Mr Fels said the euro was "overvalued" on the basis of purchasing power, while trend growth prospects for the region were half US levels. Global risk aversion as the credit cycle turns will tend to favour the dollar as a "safe haven".

Mr Fels decried a rise in "anti-capitalist sentiment" in France and Germany, and warned that markets were still too complacent about likely turmoil if the EU constitution is rejected.

"Markets will have to come to grips with the insight that the single currency will not eventually be backed by a single government. This is why the euro will have to trade at a discount to the dollar and why it is unlikely ever to replace the greenback as the world's reserve currency," he said.
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