“The euro risks dropping toward parity with the U.S. dollar over the next 2 1/2 years as the region enacts policies aimed at weakening the currency to bolster growth, Morgan Stanley said.
The 17-nation euro, which has slid 2.6 percent this year, will continue to decline as the bailout package for Cyprus fans concern about the safety of bank deposits in the region, Hans- Guenter Redeker, the head of global currency strategy at Morgan Stanley, said in an interview yesterday in Sydney. Italy’s struggle to form a government after last month’s divided vote will also weaken the euro, he said.
“This policy concerning Cyprus, people will be getting more concerned in funding the peripheral, providing deposits there,” Redeker said. “The long-term implication is that monetary transition in Europe is not working, there’s no credit, no growth, and fiscal policy is still fragmented. So, therefore, you need to be fairly pessimistic for the outlook.”
The euro traded at $1.2855 as of 12:14 p.m. in Tokyo after yesterday falling as low as $1.2829, the least since Nov. 22. The common currency will end the year at $1.25 and fall to $1.19 by the end of 2014, Redeker said. The median forecast of analysts polled by Bloomberg is for the euro to trade at $1.29 by Dec. 31.
