STOCK MARKET WATCH, Monday, December 19, 2011.

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16. Euro in Crisis 8% Stronger Than Average Since 1999 as Losses Seen for 2012

http://www.bloomberg.com/news/2011-12-19/euro-in-crisis-8-stronger-than-average-since-1999-as-losses-seen-for-2012.html

The euro, after falling to its weakest level against the dollar since January, is poised to depreciate further as traders lose confidence in the ability of European leaders to contain the region’s debt crisis.

Measures in the derivatives market ranging from future volatility implied by option prices to the cost of insuring against a drop in the euro to the record number of bearish bets by hedge funds and other speculators, show traders expect the blueprint unveiled by European leaders this month for a closer fiscal accord will fail to stem the declines.

While the euro at $1.3024 remains about 8 percent above the average since it began trading in 1999, bears say that provides more scope for depreciation as bond yields in Italy and Spain approach levels that prompted bailouts of Greece, Ireland and Portugal. Companies from Spain’s Grupo Gowex to Germany’s GEA Group AG are preparing for some countries to leave the euro and bank failures.

“The euro trading where it is now reflects a global lack of confidence in those dealing with the sovereign debt crisis,” Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, said in a telephone interview on Dec. 14. “It is also a signal of more bad news to come in the euro zone. I am not certain what future euro negatives lie ahead, but I am certain there will be more.”