Jun 07, 2010, 04.26 PM IST | Source: CNBC-TV18

Euro-dollar parity by year-end not unlikely: BNP Paribas

The euro sank to four-year lows on Monday as stocks and commodities fell after disappointing US jobs data. In an interview with CNBC-TV18, Chin Loo, Senior Currency Strategist, BNP Paribas gave her perspective on the road ahead for the euro and the impact of the Eurozone crisis on Asian currencies.

Chin Loo, Senior Currency Strategist, BNP Paribas
The euro sank to four-year lows on Monday as stocks and commodities fell after disappointing US jobs data and angst about euro zone debt problems fed fears the world economy may falter in its recovery.

Worries over the euro zone's debt problems grew after Hungary's government said the country might suffer a Greece-style debt crisis, giving investors a reason to sell the common currency.

In an interview with CNBC-TV18, Chin Loo, Senior Currency Strategist, BNP Paribas gave her perspective on the road ahead for the euro and the impact of the Eurozone crisis on Asian currencies.

Below is a verbatim transcript. Also watch the accompanying video.

Q: What are the kinds of levels you are looking at in the euro in the current week itself?

A: In the current week after breaking the low this 1.20 mark against the dollar, it is looking very much on the downside. There isn't too much support interim between now to the 1.16 level. So I think it could be a fairly good drop to the 1.16 level.

Q: For a slightly longer term, for instance for the quarter would you expect that the euro can go all the way to 1.1 in the next three months. What are the levels you are looking at and what would be the concomitant events that you would look for, would you think that 1.1 or 1.05 happens only if one of the European countries asks for a debt restructuring?

A: I still think there will be various factors at play that will drive the euro down to the 1.1 level. Our own forecast is that the euro dollar could head towards 1.16 very quickly and then to 1.10. It is difficult to measure the timing of this move but the factors that would drive it is in the core Europe with tensions now rising with the intra-European spreads now widening again, with a lot of talk about the German constitution being against this bailout of the weaker European states and as well pressures being seen on core European spreads increasing in France.

So I think there could be a variety of factors and if the Ecofin meeting this week does not properly address the issues, it could clearly indicate the euro breaking below 1.16 fairly quickly.

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