The rally in the dollar spurred by the Federal Reserve’s warning last week it may begin to slow stimulus will extend into the second half of the year as the U.S. economy gains momentum, according to Barclays Plc.
The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the U.S. currency against those of six trading partners, reached a two-week high today before paring gains. The index rose 0.1 percent to 82.421 at 3:29 p.m. in New York after climbing to the highest level since June 5.
Economic growth is likely to accelerate in the second half as the drag from this year’s $85.4 billion in automatic across-the-board budget cuts and an increase in the payroll tax fade, the firm said. The U.S. is forecast to grow 2.3 percent and 2.6 percent the next two quarters, compared with forecasts of a contraction of 0.6 percent and expansion of 0.1 percent in the euro area, according to Bloomberg surveys.
“The U.S. cyclical position continues to look relatively healthy versus other developed market countries, where central banks are either in easing mode or are not expected to tighten policy any time soon,” according to the report credited on June 21 to Jose Wynne, head of foreign-exchange research in New York. “We expect the dollar rally to broaden as the second half of 2013 progresses.”
Barclays recommends holding the dollar versus the yen, Swiss franc and euro.
Wynne couldn’t immediately be reached to comment further.
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