Take a rest

I have lost on the Aussie short position posted this morning. Let's take a rest now.

Euro's Gain Hurts Exports as Spain Sweats Biggest Rally in Year

By Matthew Brown and Paul Dobson - Jul 19, 2010
url: http://www.bloomberg.com/news/2010-07-19/euro-strength-undermining-exports-as-spain-sweats-biggest-rally-in-a-year.html

The euro’s biggest rally in a year is threatening exporters in Europe’s weakest economies as they grow more reliant on international sales for growth.

The 9.5 percent gain to $1.3008 from a four-year low on June 7 reduced speculation that the region’s debt crisis would break up the single currency. At the same time, the head of Spain’s Exporters Club says the stronger euro will make it harder to counter a “paralyzed” domestic market. European Aeronautic, Defence & Space Co., the maker of Airbus planes, says at $1.20, the currency still wouldn’t be weak. Salvatore Ferragamo SpA says it’s counting on exports to boost sales as austerity measures crimp demand from France to Italy.

Even after declining 14 percent during the past eight months as mounting deficits threatened the region’s economic recovery, the euro remains stronger than the $1.184 average since its introduction in 1999. The currency is overvalued by 14 percent, according to purchasing power data compiled by Bloomberg. Foreign-exchange strategists say the result will be a weaker euro.

“If the euro continues to appreciate it would be a disaster for the euro zone,” said Ken Wattret, chief euro-area economist at BNP Paribas SA in London. “The worst-case scenario for the euro area is you have a sustained exchange-rate appreciation because it would snuff out the recovery.”

The euro advanced 2.29 percent last week, the biggest gain since May 2009, to $1.2930. It traded 0.4 percent stronger at $1.2979 as of 3:28 p.m. in London.