Buffett Warns That Euro Faces a 'Real Challenge'

Billionaire investment guru Warren Buffett said the euro faces "a real challenge" after the currency posted its biggest quarterly gain in eight years, Bloomberg reports. "I'd rather watch it from afar than nearby," Buffett said in previously recorded remarks Tuesday.

The euro gained 11% in the third quarter after the European Union instituted a 750 billion euro ($1.04 trillion) rescue fund to address the sovereign debt crisis that enveloped the region at the end of 2009. The euro, which dropped as low as $1.1877 on June 7 due to default concerns, traded at $1.3867 Tuesday.

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But with such wide differences among the economies of the 16 nations comprising the eurozone, the CEO of Berkshire Hathaway (BRK.A) isn't convinced the bailout can resolve the fiscal crisis, according to Bloomberg.

The Oracle of Omaha warned investors about the risks of common currencies. When countries give up the ability to set monetary policy, they run a higher risk of defaulting, Buffet said. The European Central Bank sets the policy for the euro.

Buffett had already said he's "a huge bull" on the U.S., and described his $27 billion purchase of railroad company Burlington Northern Santa Fe in February as an "all-in wager" on the American economy. Berkshire Hathaway generates revenue in dollars and gets dollar-denominated dividends from its U.S. equity portfolio of more than $40 billion.

And after betting against the dollar in 2005-2006, some believe Buffett might get into the currency market again.