The dollar is poised to end a two- year slide against the euro in 2008 as government-backed funds in Asia and the Middle East purchase U.S. assets, currency strategists say.
The currency will gain 3.4 percent to $1.40 per euro, according to the median estimate of 42 strategists surveyed by Bloomberg News. The dollar is down 8.9 percent this year to $1.4497 per euro after weakening 10 percent in 2006.
Merrill Lynch & Co., Morgan Stanley, Citigroup Inc. and Bear Stearns Cos., based in New York, sold $20 billion in stakes to bolster capital eroded by credit-market losses. International purchases of U.S. financial assets totaled $114 billion in October, the Treasury Department said Dec. 17, the fastest pace in five months.
``Sovereign wealth funds are getting cheap deals by buying some of these bombed-out assets,'' said Gerry Celaya, chief strategist at Aberdeen, Scotland-based research company Redtower Ltd., whose $1.23 per euro forecast is the most bullish. ``The U.S. economy is resilient and good at clearing out all the dead wood and bouncing back, and the dollar will follow.''
The dollar depreciated this year as the worst U.S. housing slump since 1991 triggered $80 billion in writedowns at finance companies and forced the Federal Reserve to cut interest rates.
Japan's yen will rally for a second year against the dollar and end eight years of losses against the euro as U.S. and European economies slow, the strategists predicted in the survey.