...( Where is the euro going? )
The move was strengthened by a repatriation of capital from U.S. managers.
But it seems the tide is changing. According to Harvinder Kalirai of BCA Research, "Data from the U.S. Treasury show that early in 2009 foreigners were net sellers of U.S. T-bills for the first time since late 2007 and U.S.-based investors sent capital abroad for the first time since mid-2008."
The trend is particularly worrisome because long-term capital inflows in the US are weak. "Foreign purchases of corporate bonds, agency bonds, equities and Treasury bonds are all slowing", Kalirai says.
Moreover, holders of U.S. Treasuries see the risk of a capital loss when the Federal Reserve stops buying long-term government obligations. “Therefore,” says Marcus Hettinger of Credit Suisse, “investors need to be compensated with a higher opportunity for currency gains in the long-run. That is the dollar has to go down.”
If some analysts claim that the euro is going to appreciate because the dollar, the pound or the yen are inherently weaker, other experts bet that the common currency will decline because the European authorities are less stimulative than their main counterparts.
"I think the dollar ought to rise in the short-run," says David Kotok of Cumberland Advisors. "Both the monetary expansion and the fiscal stimulus are unprecedented in the U.S. and this suggests to me that America ought to break out of the doldrums before the other economic blocks, giving support to the dollar."
Asmara Jamaleh of Intesa Sanpaolo has a similar reasoning: "If the U.S. has adopted such extraordinary steps, it means economic activity worldwide is weaker than currently envisioned. Sooner than later, the European Central Bank will cut interest rates, perhaps already in April and then in June, moving the base-rate from 1.5% to 1% by then. The euro bounced because the market was unprepared to the Fed announcement last week. But as soon as it gets accustomed, the euro should fall back of its own account to 1.25-1.30 in a few months".
As you see, there is no consensus opinion around on the outlook for the euro. Perhaps there is only a slight bias in favour of the common currency, and a more shared view that whether the euro moves up or down, the net trend is unlikely to be very strong.