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Dollar to rise most since 1981, best predictor says
Strategists who came closest to predicting the dollar’s value against the euro so far this year see it strengthening as much as 17 percent in the second half as the US recovers from the recession faster than Europe.
CIBC World Markets Plc, Deutsche Bank AG, Bank of America Corp. and Wells Fargo & Co. estimate the US currency will rise more than 4 percent by December 31 after May ended with its sharpest three-month fall since 2002. At the start of the year, all had second-quarter forecasts within a penny or two of the US$1.4056- pereuro close on June 26, Bloomberg’s currency survey shows.
“I’m reasonably bullish on the dollar,” said Henrik Gullberg, a currency strategist in London at Frankfurt-based Deutsche Bank, which Euromoney Institutional Investor Plc ranks as the world’s biggest foreign-exchange trader. “If you look at the data over the past few weeks, it has been consistent with the situation where the US is a quarter or two ahead” of the 16-country euro region in rebounding, he said.
At the start of the year, after 2008 closed with the euro worth $1.3971, Deutsche Bank said it would weaken to $1.40 by June 30, just shy of where it was two trading days before the quarter’s end. Now the bank predicts a 17.1 percent gain to $1.20 per euro by year’s end, which would be the greenback’s best two-quarter performance against the euro or a basket of predecessor currencies since 1981.
Emerging from turmoil
Little changed so far in 2009, the dollar is down 5.6 percent this quarter to trade at $1.4026 as of 8:21 a.m. in London. Against the yen, which has declined against all 16 major currencies tracked by Bloomberg this year, the dollar has gained 5.3 percent since December 31 to 95.46 yen.
Pro-dollar predictions reflect signs that the US economy is emerging from the worst turmoil since World War II. Orders for American-made durable goods unexpectedly jumped in May, the Commerce Department said June 24. Median forecasts in Bloomberg’s economist survey predict the US will grow 1.9 percent next year after shrinking 2.7 percent in 2009 as the euro economy contracts 4.3 percent before expanding 0.5 percent.
The Federal Reserve on June 24 said that “the pace of economic contraction is slowing.” The Organization for Economic Cooperation and Development last week urged the European Central Bank to cut interest rates further to speed the recovery there.
“In Europe, there’s a lot of headwinds, so the bullish-dollar story is based on what’s going on elsewhere,” said Adam Fazio, a CIBC currency strategist in New York. “We are bullish dollar in the near term.” Toronto-based CIBC predicts a 4.1 percent increase in the next two quarters.
thanhnien, bloomberg
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