BANGALORE (Reuters) – Both the euro and yen will fall against the U.S. dollar next year, but the pound will rise, according to the most accurate forecaster in the November Reuters foreign exchange poll.
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Informa Global Markets’ currency strategist, Tony Nyman, who clinched the top spot, said central bank policy expectations are returning to the fore in FX markets.
The collective view among forecasters and traders is that when the U.S. Federal Reserve eventually scales back its monthly bond-buying – which many consider likely by March – the dollar will rise. The question is when and by how much the Fed will cut back.
By contrast, the European Central Bank and the Bank of Japan are more likely to ease policy further as both banks struggle to get inflation up to their targets.
Still, Nyman predicts the euro will weaken only a tad from current levels, to $1.35 in a month, $1.33 in six months and $1.30 in a year’s time. The currency was trading at $1.36 on Wednesday.
Nyman forecasts the yen, which lost over 4 percent versus the dollar through November, at 103 in a month, 106 in six months and 110 in twelve months’ time.
The Bank of England has already ended its quantitative easing. Markets are now speculating on when it will tighten policy, and not paying much attention to the bank’s attempts to pin down the timing through forward guidance.
Consequently, the latest monthly foreign exchange poll showed the pound will weaken to $1.58 next year. But Nyman forecasts the pound at $1.65 in a year.
(Reporting by Deepti Govind; Larry King)