Bloomberg News

Euro to Drop to $1.20 This Year Amid Crisis, FX’s Taylor Says

October 11, 2011

Oct. 11 (Bloomberg) -- John Taylor, founder and chief executive officer of FX Concepts LLC, said the euro will end the year at $1.20 before falling to parity with the dollar as the currency union struggles through a sovereign debt crisis.

Taylor, who restated his call for another recession in the U.S. and Europe, said the common currency has remained supported in the past week as leaders pledge to deliver a plan to support banks amid the crisis. Taylor, based in New York, runs the world’s biggest currency hedge fund.

“I would be surprised to see the euro hold above $1 through this crisis,” Taylor said in a Bloomberg Television interview with Michael McKee. “It’s not over. The banks are going to be in trouble when Europe goes into a recession next year.”

The euro rose 0.2 percent to $1.3662 at 2:43 p.m. in New York, after gaining as much as 2.4 percent yesterday. It has dropped 4.9 percent since the end of August as concern increased that European banks holding debt of the region’s struggling nations will have difficulty in accessing funding.

Taylor, whose firm oversees $8.5 billion, said Sept. 15 that the 17-nation currency needs to be reorganized amid a failure to continuously coordinate policy.

The euro yesterday rose by the most in more than a year against the dollar after German Chancellor Angela Merkel and French President Nicolas Sarkozy said Oct. 9 that they have given themselves three weeks to devise a plan to recapitalize banks and find a “durable” solution for Greece’s debt load.

Taylor also said the dollar will strengthen as the U.S. economy falls into a recession and as banks become more reluctant to lend, driving investors to the greenback as a refuge.

--Editors: Dave Liedtka, Paul Cox

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Michael McKee in New York at mmckee@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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