Goldman Sachs Group Inc.’s Thomas Stolper, who correctly predicted the dollar’s slide against the euro this year, is deviating from the consensus that the greenback will be among the best currencies to own in 2014.
The dollar will weaken through 2014, reaching $1.40 per euro for the first time since October 2011, Goldman’s London- based chief currency strategist said. The mean estimate in a Bloomberg survey of 46 contributors is for a 7 percent rally to $1.28 per euro from $1.3758 today.
Firms from BNP Paribas SA to Barclays Plc and Morgan Stanley say a strengthening U.S. economy will allow the Federal Reserve to pull back on stimulus measures that include printing dollars to buy $85 billion of bonds every month. For Stolper, that will be offset by the Fed keeping its benchmark interest rates at about zero even as it reduces bond purchases.
“Tapering is in the price already, we find it difficult to see where the dollar strength would come from,” Stolper wrote in an e-mailed response to questions this week. “There is always a risk that stronger growth in the U.S. suddenly pushes rates even higher as markets anticipate a stronger Fed response. However, our base case is that we see only marginal support for the dollar from interest rates.”
Stolper’s Calls
Stolper, 45, predicted in December 2012 that the dollar would trade at about $1.33 per euro in June. It averaged $1.32 that month, falling as low as $1.34. He cut his outlook on the dollar Sept. 12 when it was trading at about $1.33, predicting it would weaken to $1.38 per euro in three months, from a previous forecast of $1.34.
Of 46 analysts surveyed by Bloomberg, 42 expect the greenback to gain against Europe’s common currency next year as rising Treasury yields lure international investors from lower returning counterparts. Benchmark 10-year Treasury notes yield 104 basis points, or 1.04 percentage points, more than comparable maturity German bunds, close to the biggest premium in about seven years.
The Bloomberg U.S. Dollar Index has risen 1.8 percent from an eight-month low in October as gains in employment added to speculation the Fed may slow its quantitative-easing program as soon as next week’s policy meeting.
Rising Euro
The euro has strengthened 4.3 percent this year against the dollar, making it the best performer among 16 major currencies tracked by Bloomberg. It got an added boost after European Central Bank President Mario Draghi left interest rates unchanged and gave no indication he would take further steps to ease monetary policy.