Bloomberg News

FX Concepts’ John Taylor Says Euro in a ‘Death Struggle’

November 30, 2011

(Adds comment from Taylor starting in second paragraph.)

Nov. 29 (Bloomberg) -- John Taylor, founder of the world’s largest currency hedge fund FX Concepts LLC, said the euro is in a “death struggle” as European policy makers seek to salvage the shared currency amid the region’s sovereign debt crisis.

Even with a “bleak” outlook for the currency union surviving in its present form, the 17-nation euro is trading above its life-time average of $1.2044 because of debt purchases by the European Central Bank and European financial institutions repatriating funds, according to Taylor.

“Banks are shrinking and selling all of their offshore assets and bringing them back to Europe and that means in fact, that there is a persistent buyer of euros, which is their own financial institutions,” Taylor said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “The outlook is bleak, but there’s always the hope that the bleaker it gets, the more the governments are going to wake up and do something.”

Taylor, who manages about $5.5 billion from New York, predicted several times since 2010 that the euro will fall to parity versus the dollar. The common currency rose 0.1 percent to $1.3333 at 10:50 a.m. in New York.

Europe’s effort to expand its bailout fund to 1 trillion euros ($1.3 trillion) is falling short, forcing renewed consideration of a role for the ECB in insulating Spain and Italy from the debt crisis, two officials familiar with the discussions said today.

Finance ministers will hold an initial discussion tonight on channeling ECB loans to cash-strapped euro nations through the International Monetary Fund, aiming to bring the central bank onto the front lines without violating its ban on direct lending to governments, said the people, who declined to be identified because the talks are at an early stage.

--With assistance from James G. Neuger in Brussels. Editors: Dave Liedtka, Paul Cox

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

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


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