The single currency’s performance over the last few weeks has contrasted with that of the first five months of 2011, falling below par as Greece’s potential debt restructure continues to fuel fears of a eurozone collapse, says King in an investment note. Furthermore, austerity measures taken by European leaders are beginning to take their toll on growth in the region, adds King, who goes on to suggest that long positions in the euro are being closed out, serving to further harm the currency.

All signs point toward no improvements in the euro in the near future, regardless of any rate hikes made by the European Central Bank, as its poor performance is primarily borne out of enduring concerns over the peripheral eurozone members, says King. On the other hand, he has a much more positive outlook on non-euro European currencies.

King highlights the Swedish krona for its strong performance so far this year, and predicts it will continue to perform well as interest rates are set to rise by 0.75 per cent, to 2.5 per cent by the end of the year. The Swedish currency is also likely to benefit as other central banks diversify their reserves, he adds, but he also points out that if the krona becomes too strong it may have a negative effect on exports and the Swedish economy.

Of the G10 currencies, the Norwegian krone has also performed particularly well recently. King expects the currency to be strengthened as the Norges Bank returns to a rate hiking cycle. He also expects a rate hiking pattern to develop for sterling, predicting quarterly rate hikes from November onwards to combat high inflation. This will bolster sterling, as will the asset sales he expects to take place in order to unwind quantitative easing.

The outlook for the Swiss franc is slightly weaker than that for other non-Euro currencies, but the Swiss National Bank is poised to react to any further weakening in its currency, which would strengthen Switzerland’s position against imported inflation and thus support the economy.

The report coming out of RBC Wealth Management implies that, for the time being at least, the decision to remain independent of the single currency will pay off for those who chose to do so.