Cheap stuff as Euro, USD and Yen weaken. Emerging markets can benefit a lot from the high tech products and services from cheap Eurozone, Yen and USD. Yen already weak, now USD and Euro fight a weakening battle.
Weak dollar
Mitul Kotecha, Calyon
Published: October 3 2007 17:55 | Last updated: October 3 2007 17:55
Central bankers would be better off talking the US dollar higher rather than the euro lower as the dollar is weak not just against the euro but against a host of other currencies, says Mitul Kotecha, head of global foreign exchange research at Calyon.
“There has been a distinct intensification of official concerns about the strength of the euro and its impact on the eurozone economy.
“Clearly, there are different thresholds for euro strength across the eurozone depending on the country in question. However, the strength of the euro is an easy scapegoat and is likely to continue to be blamed,” he notes.
So does this mean there is a risk of imminent European Central Bank intervention to weaken the euro?
“We doubt it is imminent, but it may not be that far off,” says Mr Kotecha.
The difficulty that European policy makers will have in talking the euro lower is that, unlike in the past, the problem lies with the dollar. The euro is actually not that strong on a trade-weighted basis.
“The bottom line is that the ECB is unlikely to find intervention an easy prospect and this time round may not find much support from the US or other central banks such as the Bank of Japan.
“So unless the ECB fancies taking on the market, it would be better off waiting for market forces to take the euro lower against the dollar.” |
