After its biggest slide since being created in 1999, the euro is finding a floor.
A torrent of money unleashed by the European Central Bank is fueling demand from U.S. and other international investors for the region’s stocks — and the currency needed to buy them. Global mutual funds and exchange-traded funds that focus on European equities attracted $63.6 billion this year through April 22, up 70 percent over the same period in 2014, according to data compiled by EPFR Global.
Rather than being a referendum on the outlook for growth in the euro zone, demand for the 19-nation currency reflects appetite from investors who want a piece of this year’s 19 percent rally in the region’s stocks.
“European equities went from being an incredibly unloved asset class to very fashionable almost overnight,” David Donabedian, the Atlanta-based chief investment officer at Atlantic Trust Private Wealth Management, which oversees $26.2 billion, said April 23. “In the short term, the euro will probably firm a bit more.”
Demand for the region’s equities has driven the Stoxx Europe 600 Index to a record since ECB President Mario Draghi announced his quantitative-easing plan on Jan. 22. The gains mirror the reaction during the Federal Reserve’s third bond-buying program, which ran from September 2012 to October 2014 and sent U.S. stocks higher. The dollar strengthened about 10 percent in that time.