European debt crisis could push dollar even higher
NEW YORK (AP) — The ongoing European debt crisis could push the dollar even higher against the euro currency in the coming weeks.
David Woo, head of global rates and currencies research at Bank of America Merrill Lynch, says the dollar could jump in the next month, pushing the euro down to $1.20. That's nearly a nickel lower than where it ended trading on Wednesday, $1.2459.
Speaking at a gathering with the media on Wednesday, Woo said the euro wasn't cheap enough for all the possible troubles facing the 17-country currency. "This is the epicenter of the global financial earthquake," he said.
Spain looks especially worrisome. The country's government has asked for up to $124 billion (100 billion euro) in loans from its eurozone partners to rescue its struggling banks. But that will add more debt to a country already struggling with high borrowing costs. At current rates, the bond markets are banking on a roughly 70 percent chance that Spain will default on its debts, Woo said.
The leaders of the 27 countries in the European Union meet Thursday and Friday in Brussels for another summit. The key question, analysts say, is whether Germany will sign off on stronger measures to calm the crisis.
The European leaders ought to create "Eurobonds," debt backed by every member of the Eurozone. That would be "doing the right thing" Woo said. "Unfortunately, we've come to realize that good policy isn't always good politics."