Never Mind Greece, Euro Seen Driven Toward Parity by ECB Policy
2015-06-26 15:42:15.393 GMT
By Chikako Mogi and Kazumi Miura
(Bloomberg) -- If Greece is forced to default, sell the
euro. If Greece reaches a deal with its creditors, sell the
euro.
That’s the message from strategists including Barclays Plc
and Bank of Tokyo-Mitsubishi UFJ Ltd., who say what matters for
the currency is the European Central Bank’s bond purchases.
The ECB has said it will keep its 1.1 trillion-euro ($1.2
trillion) quantitative-easing program until at least September
2016, lowering bond yields in the region, while boosting stocks.
The single currency is the worst performer this year after the
New Zealand dollar among 10 developed-nation currencies,
according to data compiled by Bloomberg.
“The ECB will be the key and bigger driver for the euro,”
said Mitul Kotecha, head of Asia Pacific foreign-exchange
strategy at Barclays in Singapore. “The ECB continuing to be
aggressive through to September will continue to pressure the
euro lower.”
He said he expects the euro to test parity in the third
quarter.
The euro surged 9.6 percent from its low on March 16 to its
high on May 15 as a pick-up in economic growth stoked
speculation the ECB will shut down QE before its projected end
date. The currency has fallen 2.6 percent since then to $1.1147
as of 11:41 a.m. in New York.
Greece Watch
The euro weakened Friday amid wrangling over a deal to
avert a Greek default. The nation’s creditors offered to unlock
as much as 15.5 billion euros of aid before Greek Prime Minister
Alexis Tsipras said he won’t accept blackmail.
Such rhetoric is a distraction. The euro will again be
exposed to the “ECB trade,” whereby strong easing compresses
bond yields and weighs on the single currency amid widening
interest rate differentials, said Yasuaki Amatatsu, an analyst
at Bank of Tokyo-Mitsubishi.
“Market focus is shifting from Greece to European-U.S.
yield differentials,” Amatatsu said. He said he sees the euro
testing $1.05-$1.06 as early as July.
The shared currency will weaken about 6 percent to $1.05 by
year-end, according to the median forecast of analysts surveyed
by Bloomberg News.
For Related News and Information:
Top currency stories: TOP FX <GO>
Bond yield curves: CRVF <GO>
Snapshot of QE: ECBB <GO>
--With assistance from Rachel Evans in New York.
To contact the reporters on this story:
Chikako Mogi in Tokyo at +81-3-3201-7237 or
cmogi@bloomberg.net;
Kazumi Miura in Tokyo at +81-3-3201-8583 or
kmiura1@bloomberg.net
To contact the editors responsible for this story:
Dave Liedtka at +1-212-617-8988 or
dliedtka@bloomberg.net
Paul Cox, Michael Aneiro
2015-06-26 15:42:15.393 GMT
By Chikako Mogi and Kazumi Miura
(Bloomberg) -- If Greece is forced to default, sell the
euro. If Greece reaches a deal with its creditors, sell the
euro.
That’s the message from strategists including Barclays Plc
and Bank of Tokyo-Mitsubishi UFJ Ltd., who say what matters for
the currency is the European Central Bank’s bond purchases.
The ECB has said it will keep its 1.1 trillion-euro ($1.2
trillion) quantitative-easing program until at least September
2016, lowering bond yields in the region, while boosting stocks.
The single currency is the worst performer this year after the
New Zealand dollar among 10 developed-nation currencies,
according to data compiled by Bloomberg.
“The ECB will be the key and bigger driver for the euro,”
said Mitul Kotecha, head of Asia Pacific foreign-exchange
strategy at Barclays in Singapore. “The ECB continuing to be
aggressive through to September will continue to pressure the
euro lower.”
He said he expects the euro to test parity in the third
quarter.
The euro surged 9.6 percent from its low on March 16 to its
high on May 15 as a pick-up in economic growth stoked
speculation the ECB will shut down QE before its projected end
date. The currency has fallen 2.6 percent since then to $1.1147
as of 11:41 a.m. in New York.
Greece Watch
The euro weakened Friday amid wrangling over a deal to
avert a Greek default. The nation’s creditors offered to unlock
as much as 15.5 billion euros of aid before Greek Prime Minister
Alexis Tsipras said he won’t accept blackmail.
Such rhetoric is a distraction. The euro will again be
exposed to the “ECB trade,” whereby strong easing compresses
bond yields and weighs on the single currency amid widening
interest rate differentials, said Yasuaki Amatatsu, an analyst
at Bank of Tokyo-Mitsubishi.
“Market focus is shifting from Greece to European-U.S.
yield differentials,” Amatatsu said. He said he sees the euro
testing $1.05-$1.06 as early as July.
The shared currency will weaken about 6 percent to $1.05 by
year-end, according to the median forecast of analysts surveyed
by Bloomberg News.
For Related News and Information:
Top currency stories: TOP FX <GO>
Bond yield curves: CRVF <GO>
Snapshot of QE: ECBB <GO>
--With assistance from Rachel Evans in New York.
To contact the reporters on this story:
Chikako Mogi in Tokyo at +81-3-3201-7237 or
cmogi@bloomberg.net;
Kazumi Miura in Tokyo at +81-3-3201-8583 or
kmiura1@bloomberg.net
To contact the editors responsible for this story:
Dave Liedtka at +1-212-617-8988 or
dliedtka@bloomberg.net
Paul Cox, Michael Aneiro