Euro Calm Lures Investors

The U.S. government shutdown, debt-ceiling debate, and threat of similar future dramas are increasing the euro's appeal to investors, relative to the dollar.

The euro is staking its claim as an alternative to the dollar on concern that the world’s largest economy is destined to suffer fiscal upheavals every few months.

Europe’s common currency, which as recently as July 2012 was in jeopardy of breaking up as the region’s sovereign-debt crisis heated up, is increasingly acting like a haven. It’s this year’s best performer among a basket of 10 developed-market currencies, and its correlation to the 20 most-traded emerging-market currencies has tumbled more than 40 percent, to the lowest level since 2003, data compiled by Bloomberg show.

The euro area emerged from a record-long recession this year, with the economy growing 0.3 percent in the second quarter, the European Union said Sept. 4.

Bonds sold by the euro region’s most-indebted peripheral nations have become safer buys as volatility in Spanish and Italian debt fell in September below that of U.S. Treasuries, according to Citigroup Inc. That’s the first time the volatilities crossed since early 2011, the world’s second-largest currency trader said.

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