EUR: Safe haven or risky asset? – Rabobank

By FXStreet FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, notes that the EUR found itself under pressure overnight as investors reacted to the horror of the weekend terror attacks in Paris.

Key Quotes

“Asian investors appeared to be following the logic that economic growth in France and potentially the wider Eurozone could be impacted by the threat of terrorism. However, selling the EUR in reaction to a rise in risk aversion is counter to the behaviour of investors in the summer months when the EUR was showing safe haven properties.”

“The EUR is not a true safe haven. The EMU crisis may have retreated from the headlines but it is still working its way through the system. Last week’s collapse of the Portuguese government was a direct result of a popular push back against continued austerity. The general strike in Greece on November 12 was centred on the same theme.”

“That said, the Eurozone does benefit from a large current account surplus. Additionally, the ECB is maintaining very low interest rates. We would argue that the combination of these two factors can generate the appearance of safe haven behaviour in the EUR. We also expect that these factors reduce the likelihood that the …read more

Source:: FX Street