Buffett Warns That Euro Faces a 'Real Challenge'
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.
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.