Dealers expect U.S. dollar will strengthen in the long runThe world’s biggest currency dealers expect the dollar’s weakness will prove temporary as U.S. growth accelerates in the second half of the year.
Deutsche Bank, Citigroup, UBS AG and Barclays predict an advance of as much as 9 percent versus the euro by Dec. 31, even as the potential for more quantitative easing spurs concern that additional stimulus will debase the world’s reserve currency.
“At the end of the day, even with some recent weakness, the U.S. economy is still relatively robust compared to the rest of the developed world and that will be a boon for the dollar,” Alan Ruskin, the global head of Group of 10 foreign-exchange strategy at Deutsche Bank in New York, said in a Friday phone interview. “The Fed is the only major central bank that can even contemplate a reduction of easing at this point, and that is a good omen for the dollar.”
The U.S. Dollar Index, which Intercontinental Exchange uses to track the greenback against currencies of six trading partners, slumped 1.5 percent in April, the first drop in three months and the biggest since September.
Large speculators have also cut by more than half wagers on broad dollar gains as a slowdown in spending prompted the Federal Reserve to last week pledge more asset purchases if needed to sustain the economy.
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