August 22, 2011, 6:34 AM ET
Soros: There is a Mystery Buyer of Euros in the Market
By Isabella Steger
Associated Press
When the sage of currency market speculation talks about currency market speculation, it’s probably worth taking note.
And who else could that mean but George Soros, famous for making more than a billion dollars in profit betting against the British pound in 1992, forcing the country to withdraw from the European Exchange Rate Mechanism.
In an entertaining interview with German magazine Der Spiegel, Mr. Soros suggested that the reason the euro continues to be strong against the U.S. dollar is because of a “mysterious buyer” in the market.
He laughs off the suggestion by the interviewer that it could be him, but hints at who he thinks the mystery buyer could be.
“I certainly would not short the euro because China has an interest in having an alternative to the dollar. You can count on China to back the efforts of the European authorities to maintain the euro,” he told the magazine.
The euro has also held up surprisingly well despite turmoil in European debt markets. It’s up 7.6% against the dollar so far this year.
That said, Mr. Soros has been rather vocal lately publishing his thoughts on the eurozone debt crisis in a host of different publications. He’s a firm believer in the need to establish eurobonds, for example, and argues strongly that Germany needs to defend the single currency.
And what does he make of the dirty “S” word?
“[S]peculation makes any crisis worse,” Mr. Soros admits. But he also cannily turns the definition of “speculator” on its head, and says that it’s in fact central banks that are now the biggest speculators in the market, as they are the “most important buyers and sellers of currencies” right now.
“Hedge funds have definitely been supplanted by central banks. Markets expect the authorities to produce a financial system that actually hold together. If there is any hole in that system, speculators will rush through that hole,” he adds.