The Insiders' Guide to St. Barths: A FALLING EURO

Goldman says US dollar has bottomed, euro to fall
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>NEW YORK, Aug 14 (Reuters) - Stabilizing U.S. economic growth,
>falling oil prices and a deteriorating outlook outside the United
>States have led Goldman Sachs to abandon its ten-year bearish stance
>on the U.S. dollar.
> In a research note on Thursday, the largest U.S. investment
> bank said the dollar's long-term downtrend has ended and its
> undervaluation could lead to a substantial improvement in the U.S.
> balance of payments position.
> "It is time to say goodbye to our long-held dollar bearish
> stance. For about 10 years we have been negative on the dollar,
> occasionally wrong but mostly right," Goldman Sachs wrote in a research note.
> "But now the valuation and growth-driven improvements that we
> have been observing for a while have reached the point where they
> notably improve the medium to long-term outlook for the dollar."
> It added, however, the dollar could still face some challenges
> in the near term such as market positioning, volatility in oil
> prices and weaker U.S. consumer spending. But the "powerful
> improvements in the real trade balance suggest the dollar has
> bottomed." The bank expects capital inflows to start improving.
> Goldman revised its forecasts for several U.S. dollar pairings.
> It now sees the euro <EUR=> falling to $1.45 in three months,
> compared with estimates of $1.56. The euro should drop further to
> $1.40 over the next 12 months.
> On Thursday, the euro traded a near-six-month low at $1.4779,
> according to Reuters data. The dollar has gained more than 5
> percent against the euro so far this month, reaching its highest
> since February.
> On dollar/yen <JPY=>, the bank said it forecasts the pair
> hitting 110 yen in three months from its original estimate of 106.
> Over the course of one year, Goldman said the dollar should rise to 114 yen.
> A big part of Goldman's change in stance on the dollar was the
> more widespread weakness in economies outside the United States,
> which has led to sizable interest rate differentials in the
> greenback's favor. Interest rate markets have priced in rate cuts
> for major central banks, including the European Central Bank and
> the Bank of England, which should diminish their currencies' appeal
> to global investors.
> Aside from rate differentials, Goldman said the U.S. economy is
> finally adjusting favorably to an undervalued dollar.
> "The impact of valuation has become much clearer and more
> powerful -- increasing our confidence that strong, underlying
> forces will lead to continued improvement in dollar fundamentals in
> the next couple of years."
> It added that a strong U.S. export performance and signs of
> growing inflows from mergers and acquisitions should clearly boost the dollar.
> About other currencies, Goldman said it has become more upbeat
> on the outlook for the Brazilian real and Mexican peso. "Certainly
> the growth story in Brazil and firm balance of payments surplus
> should allow the currency to shrug off the broader U.S. dollar
> strength," said Goldman.
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"THOUGHT THIS WOULD BE OF INTEREST"