Pimco’s Clarida Sees Weakening Euro Reaching Parity With DollarLananh Nguyen
Pacific Investment Management Co., the world’s biggest manager of active bond funds, expects sovereign-debt purchases by the European Central Bank to push the euro to parity with the U.S. dollar.
The 19-nation shared currency has slumped 2.7 percent against the greenback since Dec. 31, extending six months of losses as it sank versus most major peers. It reached a nine-year low of $1.1753 in trading today in New York. The euro and the dollar were last at a one-to-one level in December 2002.
“There’s a lot more downside,” Richard Clarida, executive vice president of Newport Beach, California-based Pimco, said in an interview on “Surveillance” on Bloomberg Television. “Through the darkest days of 2011 and 2012, the euro never weakened below that $1.1837 level. We’re through that now. My own view is the next technical is parity.” He didn’t specify a timeframe.
The euro has slumped amid speculation the European Central Bank will decide at its Jan. 22 meeting to purchase sovereign bonds under the quantitative-easing stimulus strategy. Last week, Goldman Sachs Group Inc. brought forward its forecast for the euro to fall to parity with the dollar by a year to 2016, joining a minority of strategists predicting a 15 percent drop in the next two years.
Clarida said he expects the ECB to introduce a “big program” of sovereign bond purchases this month.
“Ultimately, Europe’s challenges are not monetary,” Clarida said. “Interest rates are very low in Europe. Europe’s challenges are productivity, competitiveness and fiscal.”