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Aug 26 - 02:55 PM

USD: Debunking Debasement; EUR: Not A Good Alternative (Yet) - BofA

By eFXdata  —  Aug 26 - 01:30 PM

Bank of America Global Research disagrees with the USD debasement thesis and finds no evidence that this is in progress, despite recent USD weakness.

"Debunking debasementWe dismiss popular arguments describing the recent sharp USD depreciation as debasement. Debasement is a special - indeed extreme - case of depreciation, for which the criteria have yet to be satisfied. We do not deny that debasement could happen because of policy mistakes, but so far this has not been the case in our view," BofA notes. 

"EUR not a good alternative (yet)We argue that without a fiscal and banking union, the EUR cannot be a credible alternative to the USD. Recent trends do not suggest the EUR is replacing the USD. Some increase in EUR central bank reserves is likely in the years ahead, buying EZ stable assets from the common funding of the EU Recovery Fund, but it will also depend on relative monetary policies, with the ECB facing difficult challenges," BofA adds. 

Source:
BofA Global Research

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