Economic Outlook

The U.S. economy may grow 1.1 percent in the 12 months ending June 2012, according to research by the Federal Reserve Bank of Cleveland using Treasury yields and growth data for the past five years to project output for the coming 12 months. That's less than half the 2.7 percent to 2.9 percent range projected by the Fed in its official estimates.

The U.S. risks missing debt payments should Republicans and Democrats fail to agree on raising the $14.3 trillion federal borrowing limit before an Aug. 2 deadline. S&P said June 30 that it would cut the U.S.'s credit rating to D, the lowest level on its scale of creditworthiness, should a failure to raise the debt limit lead to a default.

"It's really hard to build a near-term to six-month story where the U.S. dollar rallies when they have no credible fiscal plan in place," said Camilla Sutton, chief currency strategist in Toronto at Bank of Nova Scotia. The firm is the seventh- ranked forecaster in the survey.

'Negative on Dollar'

The dollar will slide to $1.52 per euro by year-end, following a decline to $1.50 by the end of the third quarter, according to Societe Generale SA, the second-most accurate forecaster, whose average margin of error was 5.21 percent.

"I'm negative on the dollar," said Kit Juckes, the London-based head of foreign-exchange research at the firm. "The U.S. favors a weaker currency as part of its economic solution and with employment well below where they want it to be, the Fed will keep rates lower for longer."

The Fed won't raise its target interest rate for overnight loans between banks, currently a range of zero to 0.25 percent, until the second quarter of 2012, according to the median forecast of 33 analysts surveyed by Bloomberg.

Schneider's Gallo estimates that the dollar will end the year at $1.40, about 1.9 percent stronger from last week, and No. 3 Wells Fargo & Co. predicts a recovery to $1.39.

Fourth-ranked JPMorgan Chase & Co. sees the dollar weakening to $1.48 by year-end. Credit Agricole SA, the most bullish dollar forecaster and ranked fifth in the survey, estimates $1.30.