Dollar Could Fall Further

Posted by Rob

February 20, 2008

The USD made a recovery today against the Euro with U.S. consumer prices increasing last month. These figures suggest that the Federal Reserve will make a less aggressive interest rate cut later today (19:00 GMT).

Robert Sinche, head of global currency strategy at Bank of America Corp. said, “The Fed is likely to go ahead and cut, but they will do it at a slower pace. Concerns over the financial sector tend to benefit the dollar.” - Bloomberg

The dollar rose from $1.4725 yesterday, to $1.4633 today against the Euro. Fears of further write-downs amongst prominent finance institutes bolstered the USD, along with the better than expected figures released earlier today.

Dollar Profits Short-lived?

Research carried out by Merrill Lynch suggests the USD could weaken to $1.55 against the Euro by 30th June this year.

It is believed that the slowing housing market in the US will force the Fed to cut interest rates from 3 percent to 1.5 percent by the end of 2008. - Bloomberg

Merrill Lynch’s estimate is the joint lowest amongst top financial institutions, with the median estimate of analysts expecting the dollar to rise to $1.45 per Euro by the middle of 2008.

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