The eurozone economy is projected to be in recession this year and to barely stabilise in 2013. This should provide grounds for a depreciation of the Euro against other major currencies.
Yet such a depreciation is not happening. The reason is that several foreign official institutions, notably the central banks of emerging markets such as China, are continuing to intervene in the foreign exchange market to buy Euro-denominated assets at a pace which more than compensates the sales of private market participants. Continue reading »