Investors should buy the euro and sell the dollar because the Federal Reserve needs to lower interest rates faster than the European Central Bank does, Bank of America Corp. said.
The second-biggest U.S. lender expects the Fed to cut rates by a quarter percentage point in March and April to 2.5 percent, while the ECB waits until April to lower rates from 4 percent, followed by one more cut in June. This would push up the euro to a record $1.50 in a month or two, said Tomoko Fujii, head of economics and strategy for Japan at the bank.
"We don't think the euro has peaked out already," said Tokyo-based Fujii. "There will be another $1.50 try."
The euro headed for the biggest weekly drop in 1 1/2 years against the dollar after ECB President Jean-Claude Trichet signaled yesterday he may reduce interest rates.
The euro weakened 2.1 percent so far this week, the most since June 2006, and traded at $1.4484 as of 4:26 p.m. in Tokyo. It was at $1.4487 in New York late yesterday, when it touched $1.4440, the lowest level since Jan. 22. It reached a record high of $1.4967 on Nov. 23.
Bank of America recommended investors buy the euro at $1.4530 with a target of $1.50 and sell the currency should it close below $1.4395 for two consecutive days, Fujii said.
Story contributed by Bloomberg: Read More
The second-biggest U.S. lender expects the Fed to cut rates by a quarter percentage point in March and April to 2.5 percent, while the ECB waits until April to lower rates from 4 percent, followed by one more cut in June. This would push up the euro to a record $1.50 in a month or two, said Tomoko Fujii, head of economics and strategy for Japan at the bank.
"We don't think the euro has peaked out already," said Tokyo-based Fujii. "There will be another $1.50 try."
The euro headed for the biggest weekly drop in 1 1/2 years against the dollar after ECB President Jean-Claude Trichet signaled yesterday he may reduce interest rates.
The euro weakened 2.1 percent so far this week, the most since June 2006, and traded at $1.4484 as of 4:26 p.m. in Tokyo. It was at $1.4487 in New York late yesterday, when it touched $1.4440, the lowest level since Jan. 22. It reached a record high of $1.4967 on Nov. 23.
Bank of America recommended investors buy the euro at $1.4530 with a target of $1.50 and sell the currency should it close below $1.4395 for two consecutive days, Fujii said.
Story contributed by Bloomberg: Read More
