The euro may weaken to $1.18 by June as the European debt crisis weighs on sentiment, according to Marc Chandler , chief currency strategist at Brown Brothers Harriman & Co.
For all the losses facing Europeans this year, investors from the region who bought U.S. stocks as the euro weakened are getting the best returns in a decade.
Morgan Stanley advised selling the euro against the Swiss franc, because a rise in borrowing costs may cause stress in the euro area’s economy, while in Switzerland “leading indicators of activity remain sound.”
The pound advanced against the euro, heading for its first weekly gain in seven against the 16-nation single currency, after a report showed U.K. consumer confidence unexpectedly improved this month.
Morgan Stanley raised its forecast for the dollar’s value against the euro to $1.16 from $1.24 by the end of the year after the Greek debt crisis “undermined” the European Central Bank.
The Swiss franc fell as Japan intervened for the first time since 2004 to weaken the yen, spurring speculation the European nation’s central bank may resume sales of its currency to curb its strength.
Morgan Stanley cut forecasts for the dollar against the euro, citing the increasing likelihood of the Federal Reserve further easing monetary policy.
The yen fell for a second day on speculation Japan will take steps to curb gains in the currency that are hindering the nation’s economic recovery.
The dollar will strengthen to a four-year high of $1.19 per euro, last seen in June, as either the U.S. economy recovers or Europe follows it lower, according to Morgan Stanley.
Investors should sell the pound against the dollar with a target of $1.35, Morgan Stanley said, citing the prospect of a U.K. coalition government between the Labour Party and the Liberal Democrats.
"The recent gross domestic product data is potentially a game-changer for the pound."
- Stephen Hull on Oct 29, 2010