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Dollar down but not out: Goldman

Published 08/09/2017, 03:49 PM
© Reuters. FILE PHOTO: Illustration photo of a U.S. Dollar note

NEW YORK (Reuters) - It is too early to declare the dollar is heading into a protracted decline despite experiencing a rough 2017, especially against the euro, Goldman Sachs (N:GS) analysts said on Wednesday.

Perception of a stalled agenda on tax reform in Washington, soft domestic inflation and wage growth and a possible change of leadership at the Federal Reserve have hurt the dollar in the first eight months of this year, according to two analysts at the New York-based U.S. investment bank.

"But we are not yet ready to call for sustained (dollar) weakness," Goldman Sachs senior economist Zach Pandl and chief emerging markets macro strategist Kamakshya Trivedi wrote in a research note. "Instead, we see a mixed outlook for the greenback, with gains against some crosses and losses against others."

Pandl and Trivedi said several factors would help stabilize the greenback including a possible U.S. tax cut by 2018 and an expected slowdown in capital inflows in Europe.

A widely followed index that tracks the dollar against a basket of currencies including the euro (DXY) has fallen 6.4 percent since the end of 2016.

The greenback has weakened sharply versus the euro losing nearly 12 percent, according to Reuters data.

The Goldman analysts revised their 12-month forecast for the euro against the dollar to $1.15 from $1.05.

© Reuters. FILE PHOTO: Illustration photo of a U.S. Dollar note

In late Wednesday trading, the single currency was flat at $1.1749 after hitting a 2-1/2 year high a week ago.

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