US dollar's fall against euro not to be long-lasting
Azerbaijan, Baku, Oct. 13 / Trend A.Badalova /
The American dollar's recovery against the euro may have paused but the outlook for the European single currency remains poor, analysts of the leading British economic research and consulting company Capital Economics believe.
"The relative prospects for monetary policy and the risks of a renewed escalation of the financial crisis in the euro-zone should both continue to support the dollar," they said in a report on European currency's perspectives.
The dollar is also likely to benefit further from safe haven demand, the British analysts believe.
"This support has weakened a little in recent weeks as expectations of some form of euro rescue package have grown, helping to stabilize European equities too, they said. But any rescue package would have to combine an "orderly" Greek default, a substantial increase in the funds available to peripheral euro-zone governments, and a fresh injection of large amounts of capital into the weaker banks. This is a huge political challenge".
This week the American currency fell against the euro. The main reason for that is the uncertainty about the US economic growth perspectives. Some of Fed's officials proposed to keep further asset purchases in order to boost country's economy.
On the contrary, the European currency rose as European Commission President Jose Barroso unveiled proposals on coordinating bank recapitalizations across the European Union.
Capital Economics' analysts expect the euro-zone economy as a whole to contract by 0.5% in 2012 and by 1% in 2013, whereas the US should at least continue to grow over this period.
According to analysts' forecasts, the euro will fall from current $1.37 to around $1.30 by the end of the year and as low as $1.10 by end 2013.