Macroscope | Asian demand is likely to drive the euro higher still. Here’s why

The euro has had a good start to 2018 and that may continue. Investors in Asia could well have more euros to buy as Asian portfolio managers may still be materially underweight in the single currency, having scaled back their holdings during the euro zone’s economic crisis and when the US dollar was soaring.

Of course an even stronger euro won’t help euro-zone exporters who sell outside the currency bloc, but that’s not the problem of investors in Asia who might be thinking of adding more euros to their portfolios.

One euro-zone exporter, the French spirits group Remy Cointreau, announced last Friday its results for a third quarter that ended on December 31, saying that the euro’s strength versus the US dollar would have a detrimental impact on its full financial-year profits. It hopes its fourth quarter results will be bolstered by healthy demand for its products over the Chinese New Year.

Meanwhile investors in Asia cannot have failed to notice the upbeat message now emanating from some at the European Central Bank.

“We have definitely left the crisis behind us. Europe is back!” That was the message ECB board member Benoit Coeure chose tellingly to deliver to a Chinese news organisation, Caixin Global, last month.