While the euro lost ground against the dollar in early December, few analysts think it is the start of a greater trend. The news from the Gulf Cooperation Council in early December could have been worse for the U.S. dollar, says
Jerry Furst
, director of Investors Education Network. While
Kuwait
decided to remove its dollar peg, other Arab countries, including
Iran
, decided to stick with the greenback. “So in the short run, the dollar is going to stabilize. It’s not going to regain much, but it’s not going to completely crater. It’s not in anybody’s interest,” he says. During January, he expects greater volatility and for the USD/EUR to trade between 145 and 150. “Relatively speaking, prices are going to stabilize at these levels,” Furst says.
“We have had a significant overshoot in terms of dollar weakness,” says Brian Dolan, senior research director for Gain Capital. He says that the dollar has slowed its fall, and that dollar weakness is now cycling into other economies, specifically those in the
United Kingdom
and
Canada
. Those countries cut rates in early December; and the euro zone, where European Central Bank Chairman Jean Claude Trichet held the market off for another meeting, could follow suit, as the euro zone economy is also slowing and a strong euro is killing exporters, such as Airbus. In January, Dolan expects the dollar to strengthen against the euro and to trade between 1.38 and 1.43.