Will the euro ever fall?

The further rise in the euro against the US dollar, in the face of speculation that a euro-zone country might default on its debts in the foreseeable future, might seem to indicate that the single currency is a safe one-way bet. We certainly would not rule out further near-term euro strength. But we are not ready to abandon the view that the euro-zone’s problems must inevitably weigh on its currency in time. Indeed, the higher the euro goes in the meantime, the deeper those problems - and the bigger the eventual drop in the currency - might be.