Deutsche Bank Fears a Euro vs Dollar Parity

Armen Hareyan's picture

The news is once again busy on this Monday morning not only because of the European aid plan, but also the possibility of Euro vs Dollar parity in exchange rate. This is despite Euro's jump vs dollar after the European Union announced $970 billion aid plan.

The sharp drop of the euro in the past few days has many investors worried. Just reading few forums about the future of the Euro vs Dollar exchange rate one realizes the accuracy of the euro dollar parity. Proponents of such an event will have food for thought with the remarks made Sunday by the chief economist of Deutsche Bank.

The suggestion is that the single European currency will continue to slump against the dollar, soon reaching the threshold of $ 1.20. They do not exclude that this decline may even achieve parity between the euro and the dollar the long term. Thomas Mayer shared his thoughts with the newspaper Bild am Sonntag (BamS).

Despite the massive $970 billion aid plan agreed this weekend to face a possible destabilization of another Euro member country, investors remain very pessimistic about the future of the European single currency.

On the other hand a U.S. economist Joseph Stiglitz comments to BBC that a disappearance of the euro appears unlikely for now, but should continue its collapse in the next six months. The euro's current weakness awakens obviously old nationalist overtones in many steps. Thus, according to a poll published in Bam's, over 59% of Germans say they support that Germany explores the possibility of a return to the Deutsche Mark in the event of a prolonged weakening of the euro. Similar surveys have been conducted in many European countries and lead to similar results. For example, in one poll 38 percent of the French people said they wanted to scrap the single European currency.

The European Commissioner Michel Barnier warned this weekend that speculators make "money on the backs of peoples misfortune." He held up the possibility of legal sanctions against the speculators who are accused of worsening the current crisis in Europe by speculating on the single European currency and government bonds. However, a mechanism for sanctions appears unlikely for now and difficult to implement.

Currently on Euro vs Doll exchange rate is $1.29017 for one euro.

Written by Armen Hareyan

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