Goldman Sachs lowers dollar.
The bank has reduced its 3-month forecast from 7.75 to 7.50, its 6-month forecast from 8 to 7.75 and its 12-month forecast from 9 to 8.
Goldman expects a 200 basis point rate hike at the Central Bank’s meeting on December 24th.
In June 2020, Sachs bet against the dollar as economies reopened. At that time, Goldman cited the “steady reopening process, limited evidence of a pickup in Covid infection rates, and encouraging policy actions like progress on the EU Recovery Fund” as driving its short recommendations.
In late August 2020, Goldman stated that the structural weakness in the dollar would persist, but there were a number of caveats. They said that the dollar is likely to remain low for a long time, but a number of factors may support the American currency in the near future. At this time, Goldman Sachs saw several factors for the continued cyclical weakness of the US currency and these were:
- The dollar is overvalued.
- Real rates in the US are likely to remain negative for several more years.
- The global economy should resume sustainable growth after the end of the Covid-19 pandemic.
Goldman Sachs revised its forecasts for 3.6 and 12 months downwards.
Goldman analysts predicted that the exchange rate would remain stable, given the high inflation and political risks, given the Central Bank’s emphasis on inflation targets and its commitment to increase reserves.
The bottom line: Goldman Sachs lowers dollar!