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Everybody wants to buy the euro

Why the dollar is the real question mark heading into 2017

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ECB President Mario Draghi, right, and Vice President Vitor Constancio meet the press in Frankfurt on Dec. 8.   © Reuters

With the U.S. Federal Reserve raising interest rates, and European Central Bank President Mario Draghi seemingly unable to break his addiction to quantitative easing, many investors are questioning who would want to buy the euro. The answer is simple. The whole world is eager to buy the euro. The problem in 2017 is more likely to be finding anyone who wants to buy the dollar.

The Middle East is a good example of a region of avid euro buyers. Even with the recent oil price rally, most Middle Eastern countries are expected to run sizable fiscal deficits. The International Monetary Fund expects Saudi Arabia to run a fiscal deficit of almost 10% of gross domestic product next year. To fund their budget deficits, the Gulf countries are selling central bank reserves and pools of assets held by their sovereign wealth funds.

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