Business faces triple assault

Conor Keane, Business Correspondent

Financial markets strategist Niall Dunne told the Irish Association of Corporate Treasurers’ seminar in the Maryborough House Hotel in Cork that record euro/dollar rates may be on the way.

Mr Dunne had three main points to make:

Worsening deficits and declining Asian demand for US bonds will weaken the dollar in the months ahead, to the 1.40/dollar level.

Falling British interest rates and slower British economic growth post-election should see the euro rise toward 0.72p against the pound.

Tighter credit conditions in the US and the rapid rate of credit growth across the eurozone will lead to two 0.25% euro interest rate hikes hitting 2.50% by year end.

Mr Dunne warned that recent hawkish comments from ECB officials suggest that our common interest rate will rise as soon as continental economic indicators allow.

Rather than accelerate credit growth by keeping rates at 2% indefinitely, we expect the bank to gently apply the credit brakes by raising rates in the near future,” he forecast.

Mr Dunne said: “If Asian purchases of US bonds continue to fall, then we’ll see more dollar sellers than buyers in the market, and the dollar will fall against all major currencies.”