ZURICH (AFX) - The euro could sink as low as 0.80 usd in early 2002 in a worst-case scenario, said Anja Hochberg, an economist at Credit Suisse Group's Economic Research & Consulting unit. Speaking at a media briefing, Hochberg said the dollar:euro ratio, which has fallen some 28 pct since the euro was launched in January 1999, is not so much a function of the euro's weakness but of the dollar's strength.
Hochberg said four factors are bolstering the dollar against the euro, the main factor being higher investment in the U.S., where over the past decade capital spending has climbed 15 pct per year compared with a 5 pct annual average in the euro zone.
Some 60 pct of this spending is direct investment as opposed to portfolio investment, Hochberg said, noting that direct investment is not easily transferred from one currency zone to another. The other three factors are the higher and more sustainable economic growth in the U.S., higher real interest rates in the U.S., and greater labour productivity in the U.S.
The scenario of 0.80 usd per euro is unlikely, with less than 30 pct probability, Hochberg said.
By June 2002, Credit Suisse forecasts the euro to be at 0.88 usd. At midday today, the euro was trading at 0.8475 usd.