By Michael J. Moore
Dec. 16 (Bloomberg) -- The dollar, after dropping to a more than two-month low against the euro, will fall further after the Federal Reserve cut the target lending rate and said it will buy debt as the next step in combating the longest recession in a quarter-century, according to Bank of America Corp.
The currency may weaken to $1.4860 per euro, strategists led by Robert Sinche, New York-based head of global currency strategy at Bank of America, wrote in a research note today. The Fed has reduced the scarcity of dollars and investors have slowed the deleveraging process, which drove the greenback to a 2 1/2-year high against the euro in October, Sinche wrote.
“Those temporary supports for the dollar appear to have eroded,” Sinche wrote. “ Aggressive quantitative easing by the Fed should add to U.S. dollar supply globally and undermine the value of the dollar.”
The dollar weakened to $1.41 per euro for the first time in more than two months after the Fed cut the fed funds rate to a range of zero to 0.25 percent. European Central Bank President Jean-Claude Trichet signaled yesterday it may pause in reducing borrowing costs at its meeting in January.
The dollar will drop to $1.44 per euro by the end of March, before rebounding to $1.34 by the end of the third quarter in 2009, Sinche wrote. The dollar will appreciate to 96 yen, from near 89 yen today, by the end of March, Sinche said in the note.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
Last Updated: December 16, 2008 18:06 EST
The currency may weaken to $1.4860 per euro, strategists led by Robert Sinche, New York-based head of global currency strategy at Bank of America, wrote in a research note today. The Fed has reduced the scarcity of dollars and investors have slowed the deleveraging process, which drove the greenback to a 2 1/2-year high against the euro in October, Sinche wrote.
“Those temporary supports for the dollar appear to have eroded,” Sinche wrote. “ Aggressive quantitative easing by the Fed should add to U.S. dollar supply globally and undermine the value of the dollar.”
The dollar weakened to $1.41 per euro for the first time in more than two months after the Fed cut the fed funds rate to a range of zero to 0.25 percent. European Central Bank President Jean-Claude Trichet signaled yesterday it may pause in reducing borrowing costs at its meeting in January.
The dollar will drop to $1.44 per euro by the end of March, before rebounding to $1.34 by the end of the third quarter in 2009, Sinche wrote. The dollar will appreciate to 96 yen, from near 89 yen today, by the end of March, Sinche said in the note.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
Last Updated: December 16, 2008 18:06 EST
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