Is this the beginning of a steady rise, or just another blip on the currency charts? American tourists, who’ve grown accustomed to lugging home suitcases full of bargain-priced Prada and Louis Vuitton, hope it’s the latter. And in some cases, European politicians, who’ve found that a weak euro encourages rapid export growth and discourages import competition, are siding with the tourists.
But as Jan. 1 approaches, financiers know the Germans won’t be happy about trading their historically strong Deutsche mark for a sissy currency. So they have a trick up their sleeves. Collectively, Europe’s banks hold $400 billion in U.S. Treasury bonds. Come December they could–and well may–dump them on foreign-exchange markets. That’ll make the euro frog, at least temporarily, look like a prince.
