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Will currency tensions discourage investment in paper currencies in favor of commodity alternatives?

*The Wall Street Journal, by Richard Barley, July 12, 2011

‘The Euro’s Sinking Fortunes

The euro is sinking fast.  It has fallen 2.8% against the dollar since Friday alone, and many of the supports that buoyed it against the dollar this year have disappeared.  Unless European policy makers can go beyond talk of support for the euro, it is difficult to see a recovery in the common currency’s prospects.

Until now, the euro’s resilience — it hit $1.49 in early May, up 12% from the start of the year, and was at $1.45 a week ago — could be explained by several factors.  The European Central Bank has been raising interest rates, while the U.S. Federal Reserve is on hold.  Risk assets like stocks and corporate credit markets were performing well, favoring the euro over the safe-haven dollar.  As long as the Greek debt crisis was contained, global markets felt able to ignore it.

Currency tensions were clearest within Europe as the Swiss franc, up 11.6% against the euro since the start of April, acted as a safety valve.

But a debt crisis that is dragging in Italy, which has the world’s third-largest government bond market, poses a global threat.”

*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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