Barclays Raises Euro Forecast Versus Dollar on Stimulus

Barclays Plc raised its forecasts for the euro against the dollar, citing central-bank measures that have negatively affected the greenback and helped the shared currency appreciate.

The bank expects the euro to reach $1.35 by the end of 2012, up from its previous forecast of $1.20, according to a research report. Barclays also raised its six-month forecast for the euro to $1.28 from $1.17 and its 12-month projection to $1.22 from $1.15.

The London-based bank’s year-end forecast is higher than the average estimate of $1.26, according to Bloomberg data. The consensus year-end projection for the euro has increased from $1.23 since the Federal Reserve announced a third round of asset purchases on Sept. 13.

“The Fed easing and QE3 made us change our call,” Jose Wynne, head of North America foreign-exchange research for Barclays’ investment banking unit in New York, said in an interview on Bloomberg Television’s “Lunch Money” with Sara Eisen. “They have made a very strong commitment going forward saying that they will keep buying bonds. You should be selling the dollar.”

The open-ended nature of the Fed’s planned debt purchases will lead to uncertainty and weigh on the dollar, Barclays said. The European Central Bank’s unlimited debt-buying program is intended to make previous monetary easing decisions more effective, which will be a positive for the 17-nation currency, according to the firm.

“Of the major central banks, we judge the Fed’s move as the most currency negative,” Barclays analysts wrote in a global outlook released today. “Taking the Fed and ECB decisions together, the rally in euro-dollar appears appropriate.”

The dollar weakened 0.2 percent to $1.2912 per euro at 3:35 p.m. New York time. The greenback rose as much as 1 percent against the euro on Sept. 20, its biggest gain in a month.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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