Euro’s deep dive continues…
As of this writing, the euro is cliff-diving again. It’s now down near $1.22, a four-year low. The proximate cause of the sell-off is a German plan to ban naked short-selling in stocks and certain government bonds.
Some thoughts from currency strategist Win Thin of Brown Brothers Harriman:
Euro selling has accelerated, which we can attribute to two possible factors. First, the German ban seems to be a bit of “flailing.” Given the questions we raised in our earlier note, it appears to be half-baked and not really thought out, and plays into market doubts about European policy-making credibility. The second, and perhaps more important, factor is the fact that if the Europeans are in effect trying to take away legitimate investment vehicles, then investors that are negative on Greece and Portugal can only take recourse in limited ways, the biggest one being to simply short the euro.