The worlds attention has focused on the US dollar but the euro may be facing its toughest test yet said a spokeswoman at Sakura Financial Group.
The Asia-based investment firm told clients in a scheduled email that the eurozone would likely face tough challenges in 2010 as member states slumped deeper into debt as they combat recessions in the respective countries.
The spokeswoman added that the headwinds facing the euro would affect all major paper currencies including the dollar and sterling but the euros situation was more complicated given the unique construction of the European Union.
Sakura Financial Group contends that stronger economies like France and Germany are reluctant to come to the aid of weaker ones like Greece, Spain, Ireland, Hungary and Lithuania which also share the common currency. This reticence could conceivably strain the ties that hold the EU together and place pressure on what was once seen by many as a potential replacement for the US dollar as the worlds reserve currency.
Most analysts at Sakura Financial Group agree that it is the issue of sovereign debt that weighs most on investors minds and they draw attention to the massive amount of bonds being issued by smaller nations in the EU arguing that failure to attract sufficient buyers or actual default could plunge the euro into turmoil.
The firm advised clients to remain vigilant.
Sakura Financial Group