A Gravity Test for the Euro
There are plenty of vaguely-plausible reasons why the euro has remained so firm against the dollar throughout the euro crisis, at least so far. But, with so many forces arrayed against the current exchange rate, and little reason for it to be maintained, don’t count on this stability sticking around.
CAMBRIDGE – Although I appreciate that exchange rates are never easy to explain or understand, I find today’s relatively robust value for the euro somewhat mysterious. Do the gnomes of currency markets seriously believe that the eurozone governments’ latest “comprehensive package” to save the euro will hold up for more than a few months?