International concern over the undervalued euro culminated in intervention by the central banks of the Group of Seven industrialised nations on September 22. But this time, euro-zone policymakers appear relatively unconcerned. The ECB can also claim with more justification that the euro's woes are more the result of broad dollar strength than independent euro weakness. On the ECB's trade weighted measure the euro is only slightly lower than at the start of the year. But in some respects the latest fall in the currency is more mysterious and more worrying than last year.
Investment capital continues to flow out of the euro-zone at an alarming rate.
Most worrying was the trend in equities. Foreign sales of European equities provide some evidence that US investors are now unloading the shares in euro-zone companies they received during the merger and acquisition boom of last year. European investors, on the other hand, continued to invest heavily in the US despite faltering growth. Paul Meggyesi, director of foreign exchange at Deutsche Bank, thinks there may also be a structural element to the outflow. This would make them more inexorable.