PRIME-TASS. The conspiracy among global hedge funds won’t be able to substantially impact the euro’s positions and the European currency will remain stronger than the greenback in the short term, MDM-Bank board chairman Oleg Vyugin said in an interview with Prime-TASS commenting on recent reports that international major hedge funds intend to weaken the euro.
“I guess hedge funds can definitely cause some turbulence in currency exchanges rates, but they cannot influence fundamental trends. The scope of their influence is not that big. Most money is ultimately held by pension and insurance funds. The fact the euro is weakening now reflects evident investor worries about the situation surrounding Greece and budget deficits in PIGS (Portugal, Ireland, Greece and Spain)," he said.
In his view, although the euro is overvalued in the short term, right now problems faced by the American economy are more serious than Europe’s.
“In Europe Germany, France and Italy, countries with strong diversified industrial sectors, manufacture virtually all industrial goods and items, including consumer goods. In the United States the services and financial services sector considerably ousted traditional industrial production outside of the continent. The US can deliver technologies, but the country doesn’t produce anything using them, as production tends to be outsourced and this shows that in terms of competition the American economy lags behind Europe in the short term, and therefore the euro is stronger. For this reason the world’s central banks have been changing the breakdown of national reserves in favor of the euro," MDM-Bank’s board chairman pointed out.
At the same time, as Vyugin thinks, social flexibility could play into the hands of the US going forward. “The American, when economic problems arise, as a rule, doesn’t go on strike. He moves to another place, cuts consumption and begins to work harder. Such a psychological pattern is a big advantage and longer term the dollar could recover positions," he thinks.
Trading of the dollar/euro pair will remain volatile for a long while and this trend will prevail until the global market finds a new model of growth, Vyugin said.
