Wall Street Journal
March 15, 2011
In the aftermath of Japan’s crisis, the euro has not only fallen against the yen but failed to make any headway against the dollar.
Go figure.
If anything, the compromise decision by European Union leaders to extend the European Financial Stability Facility and perhaps bring an end to the sovereign-debt crisis should make an early rise in euro-zone interest rates more likely.
With the funding costs of peripheral debtor nations on the slide since the compromise was reached, the European Central Bank will be far less worried about increasing rates by 25 basis points next month.
Higher rates, along with the reduced risk of a sovereign-debt default, should make the euro more attractive.
But there are three reasons why this may not be happening.
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