NEW YORK CITY: The euro kept falling on course toward dollar parity Tuesday (Wednesday in Manila), hitting its lowest level against the greenback in nearly 12 years.
The euro sank more than one and a half cents from late Monday to below the $1.07 line, a level not seen since the beginning of April 2003.
Given the weakness of the eurozone economy and the Greek debt crisis, and that euro bond yields have fallen to rock-bottom levels, there is simply no reason to buy the euro, said David Gilmore of Foreign Exchange Analytics.
Meanwhile, the US economy continues to grow steadily, with expectations that the Federal Reserve will begin tightening interest rates around mid-year.
Deutsche Bank posited in a research paper that the euro could go to parity, or even with the dollar, and then lower due to the combination of the euro area’s large level of savings and the additional liquidity from the European Central Bank’s just-launched quantitative easing program.
The result of the “euroglut” will be more outflows seeking yield, sending the euro lower, it said.
“The eurozone’s current account surplus is a symptom of a large pool of excess savings looking for investable assets abroad. Negative rates and quantitative easing from the ECB have engineered an acute problem of asset shortage in Europe, in turn initiating a process of large-scale capital flight.”