The euro’s recent plunge to a four-year low was overdone, says Goldman Sachs chief economist Jim O’Neill.
He forecasts the currency will appreciate by about 10 percent, to $1.35, in the next three to six months, as investors come to realize the United States has a debt crisis just like Europe.
All the talk about the euro quickly dropping to $1 is unrealistic, O’Neill says.
“That’s 21 to 22 percent away. That’s huge move,” he told Bloomberg.
“People forget the euro-dollar (rate) is a relative price. A year ago we were supposed to believe the dollar’s reserve currency status was finished, and now here we are at the other extreme.”
At some point in the future, the euro may indeed fall to parity with the dollar. “But I suspect the next notable move will be to the upside,” O’Neill said.
People have to think about what’s not already baked into the euro-dollar rate, he says.
“Going forward you have to consider whether the news (for Europe) is going to be even worse than people are talking about, or are people going to start talking about the U.S. again, which they’ve suddenly forgotten?”
Not everyone agrees.
"There is absolutely no support to the euro," Ashraf Laidi, chief market analyst at CMC Markets, told CNNMoney.com.
"There is no new reason out there, from the U.S. front, to be worried about the dollar."
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