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Euro/dollar analysis and forecasts 28th September 2009
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Market analysis
The Federal Reserve will maintain interest rates at extremely low levels close to zero for the next few months. The economy has shown signs of recovery which will help underpin confidence to some extent, although there will be serious fears that the recovery will not be sustainable. There will be further speculation over medium-term reserve diversification away from the dollar and it will also be vulnerable to being used as a funding currency.
The Euro-zone economy will remain vulnerable in the short term and there will be further concerns over the structural vulnerabilities. Risk appetite is liable to deteriorate and this should allow a slightly firmer dollar tone even though strong gains will be difficult.
Risk factors:
Severe Euro-zone banking-sector stresses would damage the Euro.
Reserve diversification is liable to be a persistent concern for the dollar.
Forecasts:
| Currency | Spot (28/09) | 1-month forecast | 3-month forecast | 6-month forecast |
| EUR/US$ | 1.4650 | 1.4450 | 1.4000 | 1.3250 |