BloombergDollar May Fall to Record Within Six Months, Goldman SachsSat Aug 25, 2007 01:22Dollar May Fall to Record Within Six Months, Goldman Sachs Says
Friday, August 24, 2007
Aug. 24 (Bloomberg) -- The dollar may decline to a record low against
the euro in the next six months because U.S. economic growth will
slow, forcing the Federal Reserve to cut interest rates, according to
Goldman Sachs Group Inc.
>From the current level of $1.3568 per euro, the U.S. currency will
weaken to $1.43 per euro in the next three to six months, Goldman
Sachs said in a research note yesterday. New York-based Goldman, the
world's biggest securities firm by market value, lowered its dollar
forecast from a prior estimate of $1.35. The dollar set a record low
of $1.3852 per euro on July 24.
Concern about losses in investments related to mortgage securities has
bolstered expectations the Fed will cut its benchmark interest rate
from 5.25 percent at its Sept. 18 policy meeting. Traders are certain
the Fed will cut its key rate to at least 5 percent by Sept. 18,
``Financial conditions are tightening at a time when clearly there's
some downside risk to the growth,'' said Jens Nordvig, a senior
currency strategist at Goldman Sachs in New York. Fed rate cuts ``will
drag the dollar lower.''
The Fed will lower its benchmark interest rate by 0.75 percentage
point to 4.5 percent by year-end, according to Goldman Sachs.
The dollar will fall also because foreign investors will reduce
purchases of higher-yielding corporate bonds, said Nordvig.
Goldman also said the dollar will decline to 110 yen in the next three
to six months, from 116 yen at present, compared with a previous
forecast of 118 yen.
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