Is Europe shooting itself in the foot? Perhaps, according to a
Wall Street Journal report yesterday.
The
European Central Bank's decision to slash short-term interest rates is driving down the euro and forcing around a half-dozen European money market funds — representing $60 billion in assets — to close to new investors, Anusha Shrivastava and Kirsten Grind reported. Instead, investors may turn to U.S. money market funds, assets which rose by $3 billion in the week ended July 11.
Firms that have closed their funds to new investors include
J.P. Morgan Chase,
BlackRock and
Northern Trust, which together account for more than half of the $137 billion European money market.
The
WSJ reported that the closures could be temporary, and the funds are open for existing investors to add money. But analysts believe more closures will follow, in a scale greater and more widespread than those in the U.S. in 2008.
"It's kind of a spiral effect," said
Anthony Carfang, partner and director at Chicago-based consulting shop
Treasury Strategies. "When one fund closes, that actually puts pressure on the other euro-denominated funds to close. It's the classic market freezing up."
The euro dropped below $1.22 for the first time in two years on Thursday. 
Edited by:
Irene Park
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