Crunch time for currencies as euro bids to arrest decline

2015 has seen the US dollar hit new heights while the euro seems to be stuck in plummeting mode. How will investors react, asks Anatole Kaletsky.

THE US dollar is hitting 12-year highs almost daily, while the euro seems to be plunging inexorably to below dollar parity. Currency movements are often described as the most unpredictable of all financial variables; but recent events in foreign-exchange markets seem, for once, to have a fairly obvious explanation — one that almost all economists and policymakers accept and endorse.

French President François Hollande, for one, has ecstatically welcomed the plunging euro. “It makes things nice and clear: One euro equals a dollar,” he told an audience of industrialists. But it is when things seem “nice and clear” that investors should question conventional wisdom.