SINGAPORE (Feb 9): Europe’s political risks are set to rise as far-right leader Marine Le Pen continues to gain ground ahead of April's French elections and the International Monetary Fund remains divided over the terms of the Greek bailout.

But Sim Moh Siong, senior currency strategist at Bank of Singapore, does not think buying the Euro would be an effective hedge against these growing risks as the EUR/USD currency pair is unlikely to move below parity.

“The EUR/USD is trapped between improving macro fundamentals fuelling early ECB (European Central Bank) tapering fears as well Trump’s currency politics and, on the other, enlarging tail risks such as European political risk,” said Sim in a note on Thursday.

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