Economist: Euro Will Stay 'Most Hated Currency'

Wednesday, 24 Feb 2010 04:32 PM

By Dan Weil

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The euro, which has dropped to a nine-month low against the dollar, will continue its decline, says Kit Juckes, former chief economist at Royal Bank of Scotland.

Europe’s sovereign debt crisis will continue to weigh on the euro, says Juckes, now chief economist at ECU Group.

“It’s become the world’s most hated currency over the last few weeks and is likely to stay that way,” he told Bloomberg.

Fiscal policy and sovereign debt problems represent the key issues for the euro now, Juckes says.

The crisis prevents the European Central Bank (ECB) from raising interest rates, which would make the euro more attractive.

“Certainly, the ECB is hamstrung,” Juckes explained.

“They can’t raise rates at this point. They have to deal with not just Greece, but Portugal and then through Spain – the scale of the public sector deficits everywhere around Europe.”

And what’s the upshot of that? “It’s going to fall further,” Juckes said of the euro.

He says it’s premature to predict the euro’s collapse. But Europe’s woes combined with the moderate U.S. economic rebound will continue to pressure the currency.

Hedge fund legend George Soros is bearish on the euro for the same reasons as Juckes.

"Makeshift assistance should be enough for Greece, but that leaves Spain, Italy, Portugal and Ireland. Together they constitute too large of a portion of euro land to he helped in this way," he wrote in the Financial Times.

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