Societe Generale SA recommended buying insurance against a euro “meltdown,” and UBS AG said the Danish krone may offer protection as Europe’s debt crisis threatens to deteriorate.
“It is not too late to get hedges,” SocGen strategists David Deddouche and Olivier Korber wrote in an investor report dated yesterday. “We simply cannot rule out entirely a further dramatic collapse” of the euro against the dollar, and a rebound in the 17-nation currency to above $1.40 “provides a fresh opportunity to hedge against such an event through tail options,” they said.
UBS currency strategist Chris Walker said “a significant escalation in the euro-zone debt crisis, to the extent the existence of the euro is itself threatened, could lead to the abandonment” ofDenmark’s currency peg to the euro. Though this would cause short-term volatility, longer term the krone would likely appreciate against other Scandinavian currencies and the euro, he wrote.
The euro was little changed at $1.4142 as of 8:05 a.m. in London. It fell to $1.3837 on July 12, the lowest level since March 11.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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