The euro, which has dropped to a four-year low versus the dollar amid concern about Europe’s debt crisis, will bounce back big time, says Warren Mosler, founder of broker/dealer AVM.
He says the single European currency may advance 34 percent from its current level of about 1.1925 to $1.60. Austerity measures adopted by euro zone members such as Greece and Spain will help the currency rebound, Mosler told CNBC.
The fiscal tightening moves will decrease the amount of euros available, he says.
"Everything they do in the euro zone is highly deflationary," he said.
"I think there's a very good chance the euro would be stronger because of the austerity measures. This can very easily get it back to $1.50-$1.60."
If it wants to keep the euro down to boost exports, the European Central Bank will have to buy dollars, Mosler says. But ideologically, the ECB doesn’t want to accumulate dollar reserves.
The ECB can put an end to Europe’s debt crisis anytime it wants, simply by creating money and giving it to members, Mosler says.
"The ECB could make a distribution of, say, 10 percent of GDP to each member. That would reduce all debt ratios this year by 10 percent."
Many experts remain bearish on the euro. “The overall fundamentals remain supportive of the dollar,” Geoffrey Yu, a UBS strategist, told Bloomberg.
“We expect the dollar to gradually strengthen against the euro.”
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