The dollar has been a beneficiary of the financial crisis, with investors flocking to the greenback as a safe haven in this time of turmoil.
But many experts say this safe-haven effect will soon wear off. Then the dollar will begin it’s inevitable decline on the back of some much new cash from both zero interest rates and the Fed’s massive printing program, under way now.
The dollar has gained 23 percent against the euro since hitting a record low of 0.625 euro ($1.60 per euro) last July.
But Steven Englander, chief U.S. currency strategist for Barclays Capital, tells Bloomberg that he sees the dollar slipping back 13 percent in the next year.
He’s not alone. Half of 50 currency strategists surveyed by Bloomberg predict the dollar will fall against the euro by Dec. 31.
Englander says foreign purchases of American assets have risen to record highs. Individual investors have bought American to the tune of $133 billion per month on average since November.
“People are sitting there holding massive amounts of zero-yielding dollar assets,” Englander says.
“If there is any sort of good news, demand for dollars can drop off very, very quickly.”
Still, some say the euro’s strength won’t last.
“While we've had a good run for a few days, there's still not much good news, so we're vulnerable to a reversal,” Dan Cook, senior analyst at IGM Markets, tells Reuters.
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