ENM: Euro's upturn against dollar likely short-lived-poll
LONDON: The euro's upturn against the dollar in September has failed to convince analysts it will keep strengthening, according to a Reuters poll that showed it sagging slightly over the next 12 months.
This week's survey of almost 70 analysts showed the euro holding roughly around its current level at $1.29 in a month's time, before declining gradually to $1.28 in three months, $1.26 in six, and finally $1.25 in a year's time.
Still, the outlook was a few cents stronger than last month's poll, reflecting the euro's recent rally.
The common European currency has posted two consecutive monthly gains of two per cent against the greenback since the European Central Bank promised to backstop the euro, touching a 4-month high of $1.3169 in September.
But Europe's worsening economic situation means few economists or foreign exchange strategists were comfortable predicting further strength, despite central bank action to calm the euro zone's debt crisis.
The ECB last month announced plans to ease the high borrowing costs of some euro zone countries by purchasing their government bonds, in a process it called outright monetary transactions (OMTs).
"We remain bearish on the euro-based exchange rates," said analysts Peter von Maydell and Anezka Christovova from Credit Suisse.
"The new OMT programme has removed the risk that high funding costs drive Spain into a solvency crisis, but relatively little to address the adverse GDP dynamic in the periphery, in our view."
Indeed, Wednesday's purchasing managers indexes (PMIs) suggested the aggressive actions taken by the world's central banks over the last two months have yet to persuade consumers to start spending again.
They suggested chances of the euro zone in particular seeing growth again before next year have dwindled, a key reason why the euro will remain weak against the dollar.
That is despite the US Federal Reserve's decision to pump an additional $40 billion per month of new money into the economy as part of its new asset purchase programme - a weakening influence on the greenback.
Against the euro, sterling will gain ground, with one euro worth 79.9 pence in one month, 79.2p in six and 78.7p in a year.
