Aug. 14 (Bloomberg) -- Goldman Sachs Group Inc. reversed course on its dollar forecast, saying the greenback has `bottomed'' as global growth weakens, oil prices decline and the U.S. trade balance improves.

The U.S. currency, after reaching a 5 1/2 month high of $1.48 per euro, will climb to $1.45 per euro in three months, analysts led by Thomas Stolper wrote in a research note. Goldman had forecast a decline to $1.56 for the same period. From today's 109.8 yen, the dollar will strengthen to 110 yen in three months, up from a previous forecast of 106.

The Dollar Index traded on the ICE futures market, which tracks the U.S. currency against six major U.S. trading partners, touched a six-month high today on concern the U.S. economic slowdown is spreading to other developed nations. The dollar has gained 7.6 percent versus the euro since touching a record low of $1.6038 in July as traders reduced bets that the European Central Bank will raise interest rates and crude oil tumbled.

``The most important driver is clearly much weaker growth outside the U.S., particularly in the euro zone, the U.K. and Australia,'' said Jens Nordvig, a strategist at Goldman in New York, in an interview. ``We have seen a massive move in European rate expectations. This shows that the dollar can gain even with the Federal Reserve on hold.''

The U.S. currency gained 3.6 percent against the euro last week, the biggest advance since January 2005, after ECB President Jean-Claude Trichet said economic growth will be ``particularly weak'' through the third quarter. It traded at a 22-month high versus U.K. pound and appreciated against the Australian dollar to the strongest level since January.

Threat of Oil

The dollar's appreciation last week prompted Bank of America Corp. to tell its customers to exit trades betting on more gains. Morgan Stanley still forecasts the greenback will approach a record low by October as the housing slump and credit market losses keep the Fed from raising rates this year.

Goldman's forecast may be threatened by higher oil prices, Stolper and Nordvig wrote. Goldman analyst Arjun N. Murti predicted in May that oil may rise to between $150 and $200 a barrel within two years because production was failing to keep up with demand. Crude oil had dropped 22 percent since hitting a record $147.27 a barrel on July 11.

Bumpy Road

The U.S. currency may still trade at $1.50 per euro in six months as weakening consumer spending slows the U.S. economy, Stolper and Nordvig wrote. The dollar will recover to $1.40 in a year, they said. The previous forecasts were for $1.60 and $1.45 for the six-month and 12-month periods.

``Until the end of the year the road may remain bumpy, given risks for U.S. demand, oil price volatility,'' and ``stretched'' bets on the currency's gain, the analysts wrote. ``The underlying picture has turned much more dollar positive.''

The mean target of 38 analysts in a survey by Bloomberg News was for $1.51 per euro by year-end. By the end of 2009, the dollar will likely strengthen to $1.40 per euro, based on the Bloomberg survey.

Goldman said the dollar will trade at 108 yen in six months, and 114 in 12 months, up from the previous forecast of 102 and 110.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net;

Last Updated: August 14, 2008 15:44 EDT