The euro traded Friday at a new all-time high…US$1.4966. Yes, we’re about to hit another milestone there too. Here at The Daily Reckoning we predicted that the dollar would fall to US$1.50/euro. That was when the dollar was still trading at less than US$1.30. Now, it looks like our target could be hit today or tomorrow. (Is it too late to move money into euros? More below…)
Is it time to buy euros? A quick answer: we don’t know. The rise of the euro was a cinch…from 88 cents to US$1.50. Now, it’s not such a cinch. The euro is a paper currency too. The ‘esperanto currency,’ we called it when it first came out.
We know who backs the US dollar – that’s why we mistrust it! But who stands behind the euro? And how long will the Europeans accept a rising currency? A strong euro makes it hard for them to export to the United States. And while the European Central Bank is less concerned with full employment than its US counterpart, Brussels has windbag politicians too – just like Washington.
What’s more, there are powerful, natural mechanisms that tend to keep currencies from diverging too much, one from another. How much higher will the euro go? We don’t know. But it’s no sure thing. As a hedge against the dollar, gold is probably a better bet.
The Daily Reckoning Australia