Euro's `Unavoidable Reckoning' May Occur in First-Half of 2011, RBC Says

The euro may weaken, falling to $1.10 by the end of the second quarter, as austerity measures in the region take hold, according to Royal Bank of Canada.

“With periphery governments appearing unwilling to provision in their autumn budgets for the 2011 downside risks, we expect the unavoidable reckoning to take place in first half 2011,” analysts including Adam Cole, head of global currency strategy in London, wrote today in a report.

“This may seem to fly in the face of the most recent spell of euro weakness, where the periphery already appears to have taken center stage, but the drivers so far are flimsy and we do not think we will see the bulk of euro-independent weakness until first quarter of next year,” RBC said.

The euro depreciated 0.4 percent to $1.2669 as of 8:07 a.m. in London.

To contact the reporter on this story: Daniel Tilles in London at dtilles@bloomberg.net

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