Barclays Says Dollar ‘Paradise Lost’ as U.S. Assets Lose Allure

(Bloomberg) -- Barclays Capital Inc., the world’s third-largest currency trader, lowered its one-year forecast for the dollar, saying foreign investors will reduce their purchase of U.S. assets. The dollar will weaken to $1.50 per euro in a year, from $1.3988 today, currency strategists Steven Englander and David Woo wrote in a research note to clients today.

“Over the medium and long term, it is hard to identify U.S. assets whose performance will be attractive enough to motivate large capital inflows,” New York-based Englander and London- based Woo wrote. They referred to the dollar’s status as “safe- haven paradise lost” as the U.S. fiscal deficit balloons and the central bank prints money to buy government and private securities.

In the next three months, the dollar will get support because the Federal Reserve refrained yesterday from increasing its Treasury purchases further and policy makers around the world are “wary of a disorderly decline” of the dollar, the strategists wrote. The dollar will strengthen to $1.35 in three months before declining to $1.45 by year-end, according to the note.