Dollar gains seen evaporating

The dollar’s best monthly performance since November may prove fleeting as a slowing US economy and falling short-term interest rates encourage investors to use the currency to fund investments in higher-yielding assets.

The US currency’s value will be unchanged from current levels by year-end, down from last month’s predicted two per cent appreciation, according to analyst forecasts compiled by Bloomberg. Bets remain tilted against the greenback even after last month’s 2.3 per cent gain in IntercontinentalExchange Inc’s Dollar Index, Commodity Futures Trading Commission data show.

While the dollar gained against 14 of the 16 most-traded currencies in May, it fell last week after weaker-than-forecast reports on manufacturing, employment and consumer confidence led traders to raise bets that the Federal Reserve will keep rates near zero.