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Do European election results signal increased fiat currency risk?

*Bloomberg, by Catarina Saraiva & Emma Charlton, May 7, 2012

‘The euro weakened to a more than three-month low after Francois Hollande was elected president of France and as Greek voters flocked to anti-bailout parties, stoking concern austerity efforts in Europe may be derailed.

The 17-nation currency slid for a sixth day, its longest series of declines since September, dropping as much as 1 percent before paring losses.  Hollande, who becomes the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity and more growth in the region.  The yen weakened against most of its major counterparts as stocks gained, boosting demand for risky assets.

‘The outcomes in both France and Greece are decidedly negative for the euro,’ said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. ‘There’s still a risk that we see this result in some kind of clashes between France and Germany going forward, based on their views on growth versus austerity.  That is a key risk for the euro.’

The euro declined to $1.2955, the weakest since Jan. 25, before trading 0.3 percent lower at $1.3051 at 5 p.m. New York time.  It dropped 0.2 percent to 104.28 yen. The U.S. dollar advanced 0.1 percent to 79.92 yen.

South Africa’s rand led gains among the most-traded currencies, rising 0.4 percent to 7.7979 per U.S. dollar, and Canada’s dollar added 0.3 percent to 99.31 cents per U.S. dollar.

The Standard & Poor’s 500 Index (SPX) was little changed after earlier dropping as much as 0.4 percent.”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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