Doubt about euro's strength pushes JPMorgan euro/gold notes; Scotia plans fixed-to-floaters

By Sheri Kasprzak

New York, Sept. 27 - Although the euro had been viewed by some as a strong currency poised to appreciate against the dollar, some doubt might be creeping into investors' minds, said one sellside market source.

"There's been enough volatility to push it down," said the sellsider reached Tuesday.

He noted that even though the euro has shown strength over the past year, it dove by 6% over a one-week period recently, leaving some to wonder if the economic crisis in Greece and other countries might be too much for the euro to bear.

These doubts have sparked a new offering from JPMorgan Chase & Co. The investment bank said Tuesday that it plans to sell notes linked to the lesser performing of the euro relative to the U.S. dollar and gold, according to a free-writing prospectus filed with the Securities and Exchange Commission.

The notes are due April 5, 2012, and the payout at maturity is 98% of the principal amount plus $1,000 times the lesser performing component return for every $1,000 of principal. This assumes that the additional amount is not less than zero.

Notes have fairly short term

The notes are for investors looking for capped exposure to the lesser of any depreciation in the European euro relative to the U.S. dollar and any appreciation of the price of gold. Investors will get a positive return at maturity if the euro depreciates against the dollar and gold appreciates by more than the 2% downside exposure.

"These have a fairly short-term, but there's a lot of volatility in both the U.S. market and in Europe. Anything could happen in that time frame," said the sellsider of the notes.

"Let's face it. This could go either way. The dollar is certainly seeing its share of pressure as well. It's an interesting structure."

The offering is slated to price around Sept. 30, with the settlement debt expected on Oct. 5.

Bank of Nova Scotia's fixed-to-floaters set

In other news Tuesday, the Bank of Nova Scotia said it intends to offer fixed-to-floating-rate notes in October.

The notes, which are due Oct. 13, 2016, have a 2% interest rate for the first six months and pay Libor plus 40 bps for the remaining term of the note, subject to a 5% cap per year. Interest is payable quarterly.

Payout at maturity is par.

The notes are poised to price on Oct. 7 and settle around Oct. 13.

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