Greece: the fall of the euro creates more uncertainty among investors … – The Chronicle

Greece: the fall of the euro creates more uncertainty among investors … – The Chronicle

Finance and markets

The victory of the left in Greece reinforces the hypothesis debt restructuring and a return to the drachma. It could be a formula for others to follow

The euro weakened late yesterday and approached a 11-year low against the dollar after projections showed that the leftist Greek Syriza had won an early election, raising the risk that the country demand a renegotiation of its debt to the austerity measures. The single currency fell more than half a cent and skirted the level of u $ s 1.1140 in early trading in Australia and Asia region after official projections showed that SYRIZA would win between 149 and 151 places in the Greek parliament, 300 posts. The sharp changes in the value brought uncertainty among investors and affect the Argentina as an investment destination (see separate article).
If confirmed, the result could be enough to install the leader of SYRIZA, Alexis Tsipras 40, as head of the first government of the euro zone that openly opposes the terms of a bailout from the European Union and International Monetary Fund.
Some investors now believe that the euro could be devalued to the point t hat achieves an equal footing with the dollar for the first time since he was above the dollar in late 2002, according to reports in the Wall Street Journal .
“If you had asked me a few months ago, would have said that parity could perhaps be in the coming years. Now we can not rule even before the end of the year,” said Thomas Kressin, head of foreign exchange Europe at Pacific Investment Management Co.
In the same vein, Morgan Stanley cut its projections regarding the value of the euro. According to his calculations, the currency will end 2015 at 1.05 per dollar instead of closing the year at 1.12.
In turn, Bank of America believes that the euro is now devalue 1 , $ 10 later this year, from 1.20 in the previous forecast, while HSBC analysts reduced their expectation year to $ 1.09 from $ 1.15.
Cutting estimates echoed on Wall Street, which in the past year failed to predict major setbacks in the performance of sovereign bond s globally and oil prices. These declines have raised investor concerns about global risks.
Under the program of bond purchases by central banks create new reserves to buy assets of financial institutions. Central banks receive bonuses and entities earn money that can be used to provide new loans to households and businesses. Such expansionary monetary policies generally weaken the currency of an economy partly because lower interest rates make the currency less attractive. In turn, a weaker currency makes the most competitive foreign products, which could benefit the export economy of Germany.
The euro remained at a relatively high level in recent years, peaking 1.60 per dollar in 2008 and traded near 1.40 per dollar in May last year, partly because the ECB was late to the world of quantitative easing by the Federal Reserve, the Bank of Japan and the Bank of England had already implemented. The program of bond purchases by the ECB by 60 billion euros per month (about u $ s 68 million) at least until September 2016).