Some Expect Euro at Parity

The euro may slump to parity with the dollar in the first half of this year if the European Central Bank expands monetary stimulus to include buying sovereign bonds under quantitative easing, according to Nomura Holdings Inc.

The 19-nation shared currency has dropped 2.6 percent since Dec. 31, extending six months of losses. It touched a nine-year low of $1.1753 today in trading in New York.  “Reaching parity within six months I don’t think is out of the question at all,” Jens Nordvig, managing director of currency research at Nomura, said in an interview in New York yesterday. “That’s very possible.”

Nomura’s base-case forecast is for the euro to be at $1.20 by the end of the first quarter, drop in the second quarter to $1.15 and reach $1.12 by year-end.  The prospect of quantitative easing, combined with money flowing out of Europe’s fixed-income markets as investors seek higher yields in other countries, may accelerate the euro’s decline, Nordvig said.

Bloomberg

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