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Euro Rises, But are Underlying Economies Sound

January 27, 2011

As a follow-up to yesterday’s blog about Estonia joining the euro, the euro is still sailing through troubled water.  Today, French President Nicolas Sarkozy reiterated that France and Germany would never let the euro collapse.  Foreign currency traders seem to be agreeing the Sarkozy that the euro will be around for a while.  In fact, the euro/dollar exchange rate has continued to rise recently, reaching €1 = $1.37 on Tuesday, which is actually higher than before the Irish bailout.  Interestingly, after both bailouts in 2010, it has taken the euro about 60-70 days to regain the ground that it lost to the dollar as the result of the EU and other’s financial support for a Eurozone government.

However, does this mean that the underlying economics of some of the more troubled EU member states are now in a position to allow investors to stop worrying?  Ironically, the PBS News Hour also ran a story on the euro and the financial situation of some of the more troubled Eurozone countries on Tuesday, and it was a bit less rosy:

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