Rallying dollar heads for big advance
Of the 45 participants polled from Sydney to New York on June 24, 67% said to sell the euro against the dollar, up from 52% a week earlier.
The dollar is being buoyed by a fourth straight year of faster economic growth than Europe and the higher yields available on US debt. Investors and traders pushed the euro to a 10-month low on speculation the European Central Bank will reduce interest rates for the first time since 2003 to revive the region’s sluggish economy.
“The dollar can keep doing well,” said Gerry Celaya, chief strategist at Redtower Research, a market forecasting company in Aberdeen, Scotland, which had the most bullish prediction for the dollar this quarter.
Measured by the Federal Reserve’s Trade-Weighted Major Currency Dollar Index, the dollar has climbed 4% to 85.06 since March 31, the biggest quarterly increase since the three months ended September 30, 2000. Currencies included in the index are the euro, yen, Canadian dollar, Swiss franc, British pound and the Swedish krona.
Record US trade and fiscal deficits combined with the lowest interest rates in four decades sent the index down for three years through 2004.
A fourth drop would have been unprecedented since the end of the Bretton Woods system of fixed exchange rates three decades ago.
Against the dollar, the euro fell 1.6% last week to $1.2092 at 5pm in New York on June 24, according to currency-dealing system EBS. The dollar strengthened 0.4% to 109.04 yen. The dollar is up 6.8% since the beginning of April versus the euro, trading at $1.2183 as of 7.10am in New York and 2% compared with the yen at 109.29.
The dollar’s advance this quarter was unexpected by most of the traders, strategists and investors surveyed by Bloomberg at the end of March and beginning of April.
The median forecast was for the dollar to weaken to $1.32 per euro and 103 yen.
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