Barclays PLC : Investors See Limited Euro Fall If Greece Leaves - Barclays Survey
06/17/2012| 08:16pm US/Eastern
By Eva Szalay
Investors generally believe that if Greece were to leave the euro, the currency would fall, but possibly only by six cents against the dollar, a quarterly survey by Barclays PLC (BCS) showed Monday.
The proportion of investors who expect a euro dropout this year has risen sharply over the past three months, the survey showed. Nearly 60% of over 400 investors surveyed by the U.K. bank in the second week of June said they expect at least one country to leave the currency in the next year, up from around 40% in the previous survey.
But even if Greece were to leave, the largest proportion of respondents expect the euro to trade in the $1.10-$1.20 range in the next three months. The New York day ended Friday with the euro trading at $1.2615. Only 7% of investors thought the currency would drop below parity against the dollar in that scenario, and 14% expect the currency to strengthen above the $1.25 level in case of a Greek exit.
"The factors that usually make currencies collapse are just not there," said Paul Robinson, a main contributor to the survey and European head of foreign-exchange Research at Barclays in London. A Greek exit "is the single biggest factor for depreciation, but it's not big enough to cause the currency to collapse."
The survey showed that euro-zone debt problems are easily the biggest concern for global investors, the majority of whom expect further debt restructuring in Greece and across the weaker euro states. Only 42% think that Greece will be the only country requiring further assistance, and even investors in emerging-market assets view the European crisis as their main concern, surpassing worries about a potential hard landing in China.
Investors appear to see the euro crisis continuing to drive strong demand for the perceived safety of U.S. government bonds. Under 2% of investors think that yields on benchmark 10-year U.S. Treasurys will climb to above 2.25% in the next three months, compared with 56% in the previous three months. Yields currently stand at 1.5925%.
"Clearly the European problems are affecting U.S. yields: 93% think that [these problems] have reduced U.S. 10-year yields by more than 25 basis points since the crisis started," Robinson said. He added that respondents still expect more monetary stimulus in the U.S.
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