Weak Euro Helps Prop Up Italian Economy, ETF

The depreciating euro currency could help promote healthier growth in the Italian markets and country-specific exchange traded fund.

The iShares MSCI Italy Capped ETF (EWI) has increased 6.5% over the past month after falling 13.0% over the past year. [PIIGS ETFs Look to Breakout]

Pier Carlo Padoan, Italy’s finance minister, argued that the euro, which traded at about $ 1.132 Tuesday from $ 1.39 back in May 2014, is now trading at a level more consistent with economic fundamentals, the Financial Times reports.

“The macro picture in Europe?.?.?.?is now a little bit more encouraging than it was a few months ago,” Padoan said, adding that the euro is “approaching… a more fundamental, consistent exchange rate.”

The euro currency has been weakening ever since the European Central Bank announced its aggressive quantitative easing program. [Ahead of ECB Meeting, a Rush to Europe ETFs]

Italy’s economy significantly benefits from the weaker euro currency as most of its competitive industries, including manufacturing, food and wine, heavily depend on exports – a weak euro makes Italian goods cheaper for foreign buyers.

Italy is the seventh largest exporting economy in terms of gross exports and fifth largest manufacturing producer in the world, writes Michael Hennigan for Finfacts.

The country’s industrial sector is also strengthening, with industrial production rising 0.4% in December, marking the second consecutive month of growth for the first time in over a year, reports Liam Moloney for Dow Jones Businesses News.

“It’s mainly machinery and it is from abroad, rather than a domestic pickup,” Istat official said.

Additionally, looking at Italy’s economy, the country is expected to shift out of a three-year long recession. The Bank of Italy, the European Commission and analysts anticipate the Italian economy to expand at least 0.5% this year.

iShares MSCI Italy Capped ETF

For more information on Italy, visit our Italy category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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