Dollar Expected To Soften

“The dollar’s best monthly performance since November may prove fleeting as a slowing U.S. economy and falling short-term interest ratesencourage investors to use the currency to fund investments in higher-yielding assets.

The U.S. currency’s value will be unchanged from current levels by year-end, down from last month’s predicted 2 percent appreciation, according to analyst forecasts compiled by Bloomberg. Bets remain tilted against the greenback even after last month’s 2.3 percent gain in IntercontinentalExchange Inc.’s Dollar Index, Commodity Futures Trading Commission data show.

While the dollar gained against 14 of the 16 most-traded currencies in May, it fell last week after weaker-than-forecast reports on manufacturing, employment and consumer confidence led traders to raise bets that the Federal Reserve will keep rates near zero. Traders also found less reason to seek shelter in the currency as European officials agreed to provide more financial aid to Greece and GermanChancellor Angela Merkel said the European Union is committed to keeping the euro intact.

“The dollar’s rebound is not a turning point in the bear trend,” said John Normand, head of currency strategy in London at JPMorgan Chase & Co., the world’s fifth-biggest currency trader according to Euromoney Institutional Investor Plc. “A sustained dollar rally requires a Greek default, a global recession or aggressive Fed tightening, and those are not likely to happen this year.”

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