06-09-2013, 09:26 PM
Euro zone turning from hell to haven, just within few years...
Euro becoming safe haven as region emerges from recession
FRANKFURT - The euro is becoming a haven for investors who just three years ago pushed the 17-nation currency union close to breakup, Bloomberg News reported on Friday.
The 90-day correlation between changes in the euro and a Citigroup index of bond and swaps risk has turned positive for the first time since November 2008, meaning the currency is gaining favour as investors’ perceptions of turmoil in financial markets rises. Hedge funds and other large speculators are the most bullish on the euro since 2011, data from the US Commodity Futures Trading Commission show.
While European Central Bank President Mario Draghi said on Thursday that risks for euro-area growth remained on the “downside” and the euro fell to a six-week low against the US dollar, investors are taking comfort from the region emerging from its longest recession and a sovereign debt crisis. That’s making the euro a refuge for traders fleeing emerging market nations missing out on a global recovery.
“The euro remains resilient and repatriation from emerging markets is playing an important role,” said Mr Valentin Marinov, the London-based head of Europe Group of 10 foreign-exchange strategy at Citigroup, the second-biggest currency trader.
“It could continue to play a safe-haven role as a liquid reserve currency, so long as tail risks of the euro zone breakup are held at bay,” he added.
The correlation between the euro and Citigroup’s risk index, which tracks emerging-market bond and US credit and swaps spreads, was at 0.0687 on Friday after reaching 0.107 on Aug 23, according to data compiled by Bloomberg. That was the most positive relationship since October 2008, when the collapse of Lehman Brothers was roiling markets.
The relationship turned positive Aug 22, meaning that the euro is now strengthening as the risk gauge increases. The Australian dollar’s link with the index was minus 0.131 on Thursday, meaning the currency typically declines when the Citigroup index increases.
The euro will end the year around current levels, according to Mr Marinov, making him more optimistic than the median forecast in a Bloomberg survey of analysts, which has the currency falling to US$1.28. The shared currency was little changed at US$1.3124 in early London trade after falling 0.7 per cent on Thursday.
http://www.todayonline.com/business/euro...-recession
Euro becoming safe haven as region emerges from recession
FRANKFURT - The euro is becoming a haven for investors who just three years ago pushed the 17-nation currency union close to breakup, Bloomberg News reported on Friday.
The 90-day correlation between changes in the euro and a Citigroup index of bond and swaps risk has turned positive for the first time since November 2008, meaning the currency is gaining favour as investors’ perceptions of turmoil in financial markets rises. Hedge funds and other large speculators are the most bullish on the euro since 2011, data from the US Commodity Futures Trading Commission show.
While European Central Bank President Mario Draghi said on Thursday that risks for euro-area growth remained on the “downside” and the euro fell to a six-week low against the US dollar, investors are taking comfort from the region emerging from its longest recession and a sovereign debt crisis. That’s making the euro a refuge for traders fleeing emerging market nations missing out on a global recovery.
“The euro remains resilient and repatriation from emerging markets is playing an important role,” said Mr Valentin Marinov, the London-based head of Europe Group of 10 foreign-exchange strategy at Citigroup, the second-biggest currency trader.
“It could continue to play a safe-haven role as a liquid reserve currency, so long as tail risks of the euro zone breakup are held at bay,” he added.
The correlation between the euro and Citigroup’s risk index, which tracks emerging-market bond and US credit and swaps spreads, was at 0.0687 on Friday after reaching 0.107 on Aug 23, according to data compiled by Bloomberg. That was the most positive relationship since October 2008, when the collapse of Lehman Brothers was roiling markets.
The relationship turned positive Aug 22, meaning that the euro is now strengthening as the risk gauge increases. The Australian dollar’s link with the index was minus 0.131 on Thursday, meaning the currency typically declines when the Citigroup index increases.
The euro will end the year around current levels, according to Mr Marinov, making him more optimistic than the median forecast in a Bloomberg survey of analysts, which has the currency falling to US$1.28. The shared currency was little changed at US$1.3124 in early London trade after falling 0.7 per cent on Thursday.
http://www.todayonline.com/business/euro...-recession