That was what some traders were calling the shared European currency Tuesday morning as the euro continued its ascent versus the dollar in the face of additional sovereign debt downgrades.
Standard & Poor’s cut Greece and Portugal’s respective ratings this week on concerns that the two Euro zone states would need to restructure their debt after 2013 in order to borrow from the European Stability Mechanism. S&P cut Greece’s ratings by two to double B-minus and Portugal’s rating to one level above investment-grade status.
“Given Greece’s persistently significant borrowing needs, we believe that it is highly likely that Greece will access the EFSF and, thereafter, the ESM,” said Standard & Poor’s credit analyst Marko Mrsnik in a report explaining the ratings cut and why Greece remained on ‘Credit Watch Negative’ listings.
Mrsnik warned that another downgrade of Greece’s debt in the near future was possible if the country could not tighten government spending and meet budgetary targets. Given Greece’s current rate of national spending and tax collection, Mrsnik cautioned, Greece’s government debt could peak in 2013 at 160% of GDP, making restructuring inevitable.
S&P was also betting Portugal would soon need a bailout from the European Financial Stability Fund and, subsequently, loans from the ESM. The Bank of Portugal confirmed S&P’s concerns, warning on Tuesday that the country would need a bailout in the near future if the government couldn't pass new austerity measures. Portugal's government resigned last week after its austerity plan was rejected.
How could the Euro rise given the apparent fiscal instability of its member nations? Well, some traders were betting that – despite Greece and Portugal’s problems – the European Union would still raise rates to counter inflation, which hit an annual rate of 2.4% in February. European Central Bank President Jean-Claude Trichet has hinted at a rate hike for months. He added more fuel to the speculation on Monday, saying inflation was “above the common definition of price stability in the euro zone.”
Fast Money Contributor Dennis Gartman, however, wasn’t buying the euro on the expectation of a rate hike in the near future. The publisher of the Gartman Letter, said the fundamental case for the euro was too weak to own it. “I have no intention to own a currency that I think is in as manifest trouble as the euro,” said Gartman.
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CNBC.com with wires.