Forecasters See Stronger Dollar

U.S. currency expected to appreciate as European debt crisis weighs on global economy.

There’s at least one thing that bulls and bears on the U.S. economy agree on: the dollar, the most undervalued major currency in the world, is due to rise as Europe’s sovereign debt crisis threatens the global recovery.

Strategists who as recently as November were predicting the dollar would depreciate against currencies of the Group of 10 nations, now say it will climb by year-end. After weakening against all but the Mexican peso among its 16 most actively traded peers over the past decade, it has gained against 13 of them since February.

Japan, Switzerland

Demand is being buoyed as central banks in Japan and Switzerland resist gains in their currencies, with both nations seeking to protect their exporters from rising prices for their goods. That leaves the dollar as the sole haven for investors seeking refuge from Europe’s crisis.

Bernanke’s Assessment

More Americans than forecast filed applications for unemployment benefits in the week through April 14, a government report showed on April 19, adding to signs the improvement in labor-market conditions may be faltering.

Central Bank Steps

Like the Fed, policy makers in Japan and Europe have taken steps to support their economies with fiscal stimulus.

Futures Bets

Bets on dollar gains are growing as Europe’s debt crisis, which started in Greece in October 2009, persists. Italy last week delayed its goal to balance the budget by one year to 2014, joining Spain in missing fiscal targets amid a worsening recession.

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