Weakness in the dollar will help push the euro as high as $1.40, according to Alan Ruskin, an analyst at Deutsche Bank AG.
“It’s really a case of massive dollar shorts put on against everything inclusive of the euro, and the euro something of a safety valve when some of the other currencies are not allowed to revalue versus the dollar,” Ruskin, global head of Group of 10 foreign-exchange strategy at Deutsche Bank in New York, said in a radio interview today with Tom Keene on “Bloomberg Surveillance.” A short is a bet a currency will depreciate.
The euro, which according to Ruskin has rallied “a little further than I would have anticipated,” may rise as high as $1.40, a level last reached in February.
“Then I think we’ll see some sort of sticker-shock element creep into the marketplace,” he said. “I think $1.39, $1.40 is plausible. Beyond there, it’s going to be tougher going.”
The U.S. currency declined 0.4 percent to $1.3635 per euro at 12:06 p.m. in New York, from $1.3585 yesterday. It touched $1.3643, the weakest level since April 15.
The dollar is at the center of an embattled currency market, according to Ruskin. “That’s the primary focus: dollar funding, dollar weakness and who might benefit on the other side,” he said.
Ruskin said one of his favorite trades is to buy the Swedish currency against the pound.
With the weak U.S. dollar, few countries are willing to risk export growth by allowing their currencies to appreciate, according to Ruskin.
“It’s more a case of countries trying to stop revaluing their own currencies in the face of dollar weakness,” Ruskin said. “I put the burden of responsibility at least as much on the dollar side in terms of dollar weakness effectively generating de facto strength on the other side.”
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