Tuesday, November 08, 2005

Its Official: Riots Hurt The Euro

A recent post that argued that exchange rates are driven more by markets' assessment of political stability than by fiscal and monetary factors. Here's some support from Bloomberg.

Nov. 8 (Bloomberg) -- The euro may weaken for a fourth day against the dollar in Asia on concern rioting that has escalated in France over the past week is spreading to Germany.

Social disorder may damp economic growth and deter investment in euro-denominated assets. The riots, which entered their 11th night, mark the longest stretch of urban violence in Europe's second-largest economy since the student uprising in 1968.

``The riots are spreading across France, bringing about huge adverse effects on the euro,'' said Michiyoshi Kato, a vice president of foreign exchange sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-biggest lender by assets. ``Acts of violence will surely continue to weigh on the euro.''