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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: maceng2 who wrote (21261)	7/8/2009 4:54:15 PM
From: RockyBalboa	Read Replies (2) \| Respond to of 71454

The Euro started historically at 1.18 and by then it was considered overvalued; mostly because of its weaker parts (italy, spain) which entered the common currency at politically administrated but too high exchange rates. Mostly because of that and because the market did not trust in this new currency initially, it gave in until it hit $0.83 but by that time the tech bubble imploded and traders found some Euro enconomies really doing well; Then the convergence theme was sold to us which made the zone even more competitive (by adding nonmonetized Eastern European countries; non monetized means relatively large economies operating on a very small monetary base). Since this effect could last for a decennium a higher valuation of the EUR was justified and as late as 2004 it remained undervalued below 1.17. As the convergence effect peters out and is replaced and supplemented by active monetary policy ("printing") the EUR is fairly valued at best. Problems in member states (Spain, Ireland, Hungary a EU member, Latvia etc) are not fully priced in. Measured by the pound it is overvalued about 10%, in yen terms it is possibly fairly valued. Also, against the $ it is clearly in its upper range; and most estimates assume 1.3 to 1.32 as long term target price, rather than 1.40 which it can not sustain despite the zero interest rate policy in the US plus ongoing expansive measures.