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Friday, July 4, 2003
Dollar may weaken as growth dips
The dollar may extend its 9.1 percent decline against the euro this year amid concern about the pace of U.S. economic growth, a Bloomberg News survey indicates.
The U.S. currency will weaken to $1.19 at the end of the third quarter, after gaining 4 percent against the euro in June, according to the average forecast of 56 analysts, traders and investors. It may end the year at the same level, according to the survey, which was conducted in the last two weeks of June. The dollar traded at $1.1521 yesterday in London.
Federal Reserve policy-makers, who last week cut interest rates to the lowest in 45 years, said the economy "has yet to exhibit sustainable growth." The U.S. economy has lost 324,000 jobs in the past six months, and economists surveyed predict growth will fall short of 2 percent in April to June for a third quarter, damping the allure of investing in dollars.
"The Fed is still concerned about the economy and the economic news is patchy at best," said Simon Rubinsohn, chief economist at Gerrard Ltd. in London, which manages the equivalent of $27 billion. "The factors contributing to the dollar's drop haven't gone away." He expects the dollar to trade at $1.20 by the end of September, one of the most pessimistic forecasts.
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