By Mike Bird and Ira Iosebashvili
The euro continued its longest losing streak against the U.S. dollar Friday, falling for the 10th consecutive trading day.
The single currency is down around 3.8% since last week's U.S. presidential election, slipping below $1.06 in early European trading for the first time since the end of 2015.
The sharp drop is fueling debate about whether the euro may reach parity with the greenback for the first time in 14 years, as expectations for growth, inflation and interest rates diverge.
The last time the possibility of euro-dollar parity was widely discussed was early 2015, when the euro weakened on a trade-weighted basis against a basket of international currencies.
This time, most of the move has been against the U.S. dollar.
"The U.S. used to have some monetary policy divergence with the rest of the world, now we also have fiscal policy divergence, which should be very beneficial to the dollar," said Adnan Ajant, head of currencies at asset management firm Fischer Francis Trees & Watts.
Asked earlier this week if he believed the euro would reach parity, Mr. Ajant said "well that's only 7% to 8% away; yes I would think so."
Though bond yields have risen in both the U.S. and Europe, the shift has been much sharper in U.S. Treasurys than Eurozone government debt.
The yield on 10-year Treasurys is more than 2 percentage points above the 10-year German bund yield, for the first time since the fall of the Berlin Wall, highlighting growing divergences in expected economic performance.
Steeper yields and interest rates in one country tend to strengthen the local currency, as international investors flock to assets with a higher return.
"Both blades of the scissor are moving against the euro right now," said Marc Chandler, a strategist at Brown Brothers Harriman in New York. "My view is that the currency goes to record lows."
In October 2000, the euro fell below $0.83, its weakest level ever against the dollar.
Earlier this week, Credit Suisse revised its 12-month forecast for the euro-dollar exchange rate to parity, down from $1.05, citing the divergence in interest rates and political risks in the Eurozone.
A coming referendum on constitutional reform in Italy could threaten the government of Prime Minister Matteo Renzi. The resignation of Mr. Renzi--one of Europe's most reform-minded leaders--could freeze Italy's economic overhaul and erase the meager growth the country has generated.
Investors "were surprised on Brexit, they were surprised on the U.S. election. This time, they will want to be more cautious when it comes to Europe," said Mark McCormick, head of North American foreign exchange strategy at TD Securities.
Write to Mike Bird at email@example.com and Ira Iosebashvili at firstname.lastname@example.org
(END) Dow Jones Newswires
November 18, 2016 06:04 ET (11:04 GMT)
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