Bloomberg News

Fewer Nations Will Use Euro in 5 Years, Bloomberg Survey Shows

November 02, 2011

Nov. 1 (Bloomberg) -- The number of countries using the euro will fall in the next five years, according to a survey of foreign-exchange professionals.

About 42 percent of the respondents at the Bloomberg FX11 Summit in New York last week predicted that the euro would no longer be used by all of the 17 nations in the union today, the survey showed. Thirty-one percent forecast an increase in countries sharing the currency and 27 percent saw no change.

Concern that Greece and other debt-strapped European nations won’t be able to pay back their obligations to investors prompted officials last week to increase their bailout fund to 1 trillion euros ($1.4 trillion) and recapitalize financial institutions exposed to those nations’ debt. They convinced banks to write down their holdings of Greek debt by 50 percent.

Greek Prime Minister George Papandreou pledged yesterday to put the European Union’s latest accord to a referendum, risking pushing the country into default if rejected by voters.

The euro has dropped 3.7 percent in the past year against the currencies of nine developed-nation counterparts, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has fallen 2.4 percent, and the yen has slumped 1 percent.

About 64 percent of FX11 Summit respondents said nations will artificially depreciate the value of their currencies, fueling “currency wars.” In a separate question, 74 percent of survey-takers said the yuan, which China keeps in a trading range, will appreciate up to 10 percent by October of next year.

Senate on Currencies

The U.S. Senate passed last month legislation that would punish countries for depressing their currencies. It would allow manufacturers to seek duties on Chinese imports if they can prove they were harmed by manipulation of the yuan.

The yuan has advanced 3.9 percent against the dollar this year, the best performance among Asia’s 10 most-traded currencies excluding the yen.

FX11, Bloomberg’s fourth foreign-exchange summit and the largest one yet, drew more than 270 industry professionals to Bloomberg headquarters in New York on Oct. 27; 191 participated in the survey.

--Editors: Kenneth Pringle, Dennis Fitzgerald

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

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


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