The US dollar is poised to emerge from its worst quarterly decline in 15 years as the economy grows during the second half, according to currency experts.
The dollar will trade at US$0.99 per euro and Japanese yen 123.24 at the end of the year, according to the average forecast of 51 analysts, traders and investors surveyed by Bloomberg News.
It was recently at US$0.9915 per euro and Japanese yen 119.59. Against a trade-weighted index of six currencies, compiled by the New York Board of Trade, it dropped 10 percent in the past quarter.
"Investor confidence in US assets has been badly shaken, but it's difficult to see that the dollar's decline will persist," said Adrian Cunningham, who helps oversee US$150 million at Abbey National Plc's Talorcan hedge fund in Glasgow, Scotland. "The US economy is recovering."
The world's biggest economy is expected to grow faster than those of Europe and Japan this year, which may lure investors back to dollar-denominated assets.
A slower-than-forecast recovery in US corporate profits and concern that companies are using accounting practices to falsely inflate earnings had led some investors to lose confidence in US investments.
The world's biggest economy will grow 2.3 percent in 2002, according to the International Monetary Fund. That compares with expansion of 1.4 percent in the 12 countries that share the euro and a contraction of 1 percent in Japan. The US grew an annual 6.1 percent in the first quarter, its fastest pace for two years, while the euro-region economy expanded 0.2 percent.
The dollar slumped 9 percent or more against the euro, the yen and the Swiss franc in the first half as some investors dumped dollar holdings. The Standard & Poor's 500 stock index has tumbled 13 percent this year, its biggest first-half loss since the 1970s, while the Dow Jones Industrial Average fell 7.5 percent.
"A lack of confidence in US assets is the main problem for the dollar," said Scott Barlass, director of currencies at Abbey National Asset Managers in Glasgow, where he helps oversee Japanese yen 14 billion (US$20 billion). He sold dollars this year for currencies such as the euro, the yen and the Swiss franc.
Barlass expects the dollar to weaken to US$1.05 per euro by the year's end. The euro hasn't been worth US$1 since February 2000.
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