From the April 01, 2012 issue of Futures Magazine • Subscribe!

Dollar wins by default... again

“You can see it in some of the volatility in the euro. Last year the average daily range for the euro was about 157 pips and that fell to 121 pips in February,” Michalowski says (see “Euro takes a chill pill,” below). “The volatility has come down and that is a reflection of this idea that we know what’s ahead.”

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At least for now, prospects of a breakup of the Eurozone are seen by most observers as having been put on hold. “In the short-term the euro will continue, but I can’t say what will happen in the long-term,” says Thomas Molloy, chief dealer at FX Solutions. “It’s possible that eventually at least one of the nations in Europe will not necessarily have been kicked out but will have chosen to leave (see “Jamie Thorsen: Enjoying the action of forex”).”

He and others say that increasingly stronger nations in Europe are more likely candidates to leave the monetary union. “The big risk to the euro is that Germany exits, and if Germany exits, it basically falls apart,” Frey says. “Whereas you could lose Greece, and while that would be messy and it wouldn’t be that convenient for anyone concerned, the euro could still survive. But at some point down the road in the very long run, if Germany were to exit, that marks the end of the euro for sure.”

Kathy Lien, director of currency research at Global Futures & Forex Ltd., also expects the euro to continue but adds, “Unfortunately I do not believe that a second bailout of Greece will be the end of the Eurozone’s troubles,” she says. “Greece was never the main problem — it is contagion. As a result, expect more volatility in currencies this year.” 

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