Wednesday, May 16, 2012

Speculation Centers on Greek 'Twilight Zone' Scenario

'An unstable twilight zone within the euro but with a parallel proxy drachma could possibly last for several months as the euro policy machine churned.' - Reuters Analysis

 The Reuters news agency's Mike Dolan reports from London:
Speculation about an endgame in Greece's protracted crisis has flooded markets with euro exit scenarios this week, but investors reckon there's still every chance that uncertainty will simply drag on for months.
Seeking clear-cut outcomes to the euro saga to date has proven fruitless for investors, who have instead been forced to live with the "muddle through" of European politics.
And more used to precedent, probabilities and precise numbers, asset managers are far from their comfort zone when interpreting the hyper-politicized standoff over Greece's future membership of the single currency. 
So instead of mapping binary outcomes, investment strategists are once again looking hard at the grey areas.

Read more. The global strategist for JPMorgan Asset Management is quoted--quite fittingly. Foreign Confidential™ analysts say regulators in the United States and Europe are likely to be taking a closer look at the firm's massive derivatives portfolio in terms of currency exchange risks. Nobody seems to have a clear view of the potential impact of a euro zone breakup, which could result from a Greek exit, on the derivatives exposure of JP Morgan and other financial institutions.