Europe's $1 trillion Bailout Might not be Able to Save the Euro from Going Down
Europe's $1 trillion rescue package has put new life into the Old World's assets, enhancing everything from bonds to stocks.
However, the Continent's common currency soared temporarily above US$1.30 last week, before plummeting below $1.24.
The Euro, already at a four-year down against the Dollar, is expected to go lower.
The bold, €750 billion bailout and large worldwide partnership should steady European markets and calm down the gossip of a breakup.
However this will not impede the currency from staggering this year toward the $1.18 level, where it made its first appearance in 1999.
The Euro's largest player, the European Central Bank, has yielded to political demands and, amongst other things, will start purchasing sovereign bonds in the market.
This transmits the danger of default from financially extended countries such as Greece, Portugal and Spain to the Euro zone all together. And the ECB has to finance it by successfully printing Euros, further weakening the currency.
A feeble Euro will make exports more gung ho. But if the Euro goes too down, its rank as a reserve currency will deteriorate.
Barclays Capital's Currency Strategist, Aroop Chatterjee, says, "Spain, Italy and Portugal don't have the same degree of fiscal problems as Greece, but they'll be under similar pressure to undertake fiscal tightening".
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