Helaba Research
FX FOCUS
27 January 2015
US dollar
AUTHOR
Christian Apelt, CFA
phone: +49 69/91 32-47 26
research@helaba.de


EDITOR:
Claudia Windt
PUBLISHER:
Dr. Gertrud R. Traud
Chief Economist/
Head of Research
Helaba
Landesbank
Hessen-Thüringen
MAIN TOWER
Neue Mainzer Str. 52-58
60311 Frankfurt am Main
phone: +49 69/91 32-20 24
fax: +49 69/91 32-22 44

The euro declined across the board in recent weeks. In addition to the Swiss franc,
especially the Japanese yen and a few emerging markets currencies have posted gains.
The very expansionary ECB policy and the worries about Greece put the euro-dollar rate
noticeably under pressure. Over the short term, the environment for the single currency
remains difficult, an overshooting cannot be ruled out. In the USA, not everything looks so
bright, even if the Fed is likely to hike interest rates in the middle of the year. However,
valuations and the oversold technical market data indicate that the euro-dollar exchange
rate should stabilize over the medium term.
Helaba Currency Forecast
Euro performance on a month-over-month basis
% vs. euro compared to the previous month (from 12/26/14 to 01/26/15)
US dollar
8,4
Japanese yen
10,1
British pound
5,1
18,5
Canadian dollar
1,0
Australian dollar
5,8
New Zealand dollar
3,7
Swedish krona
2,4
Norwegian krone
3,7
Czech koruna
0,1
Polish zloty
3,9
Hungarian forint
2,0
This publication was very
carefully researched and
prepared.
However,
it
contains
analyses
and
forecasts regarding current
and future market conditions
that are for informational
purposes only. The data is
based on sources that we
consider reliable, though we
cannot
assume
any
responsibility for the sources
being accurate, complete,
and
up-to-date.
All
statements in this publication
are
for
informational
purposes. They must not be
taken as an offer or
recommendation
for
investment decisions.
Swiss franc
Russian ruble
-14,9
Turkish new lira
6,7
11,0
Chinese yuan
7,8
12,3
Indian rupee
South African rand
9,7
11,9
9,4
South Korean won
Brazilian real
Mexican peso
■ Core currencies ■ Rest of G10 ■ Currencies of emerging markets
Sources: Bloomberg, Helaba Research
HELABA RESEARCH · 27 JANUARY 2015 · © HELABA
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FX FOCUS US DOLLAR
USD: high-altitude flight loses steam
The euro lost a lot of ground. For one, the elections in Greek were stoking uncertainties about the
“Grexit”. For another, the asset-buying program announced by the ECB depressed the single
currency. With a volume of more than one trillion euro – even if it is true that the sum will extend
into the coming year – the central bank surpassed the already high expectations. In less than
twenty-four hours, the euro-dollar exchange rate dropped by five US cents to a low of 1.11. In the
first half of 2014, the entire range of fluctuation in the exchange rate was all of five cents. Already
before the ECB decision, the euro-franc exchange rate slumped to parity after the Swiss central
bank surprisingly discontinued its exchange rate floor. The clear victory by the Syriza Party in
Greece did not put any additional pressure on the euro, at least.
US economic date
weaken a little
Mirror-image to the euro, the US dollar has advanced since the beginning of the year over the
important currency – except for the franc and the Japanese yen. However, the most recent dollar
strength rested less on the robust US economy. To be sure, the strong job growth and a declining
unemployment rate were persuasive. However, retail sales and the purchasing managers indexes
were more sobering. Overall, the vigour of the economy is waning a little, following a very strong
summer half-year in 2014. Thanks to the slumping oil price, inflation in the US will pull back
noticeably for the time being. However, the US central bank should carry out the turnaround on
interest rates already in the middle of the year in our view, although the expectations in the money
and capital markets of rising key rates were pushed off into the future. In spite of the ECB policy,
the interest rate advantage of the US dollar over the euro therefore shrank most recently.
Economic momentum turning in favour of the euro
ECB buying program more than priced in
USD
Ratio monetary bases USD vs. EUR*
difference of the indexes
Sources: Macrobond, Helaba Research
Medium-term euro
stabilization
USD
* monetary base until 2016: euro zone growing in line with purchase program, US stable;
Sources: Macrobond, Helaba Research
In contrast to the US, the economic situation in the euro zone brightened most recently. However,
since inflation dropped into negative territory, the ECB reacted. With the announced purchases, the
ECB balance sheet and its monetary base should expand more strongly than in 2012. The US
central bank, for its part, has expanded its balance sheet by around 1.5 trillion US dollars since
them. The ECB purchases hardly justify a stronger euro depreciation than in 2012 (1.20 US
dollars). The interest rate differences also counsel caution, even if US yields should rise a little
because of the Fed’s policy. Contra-indicators are also the quite one-sided positioning of
speculative investors, who are betting on a rising US dollar, and the technical market data,
according to which the euro-dollar exchange rate is strongly oversold. However, the important
support levels have been breached, which means that an overshooting of the exchange rate
cannot be ruled out. In coming months the euro should level off at 1.10 US dollar. In the second
half of the year, once the dust around the monetary policy has settled and the economic
divergences will shrink, the euro could recover to 1.20 US dollars. But even that would still
represent an undervaluation of the euro – based on purchasing power parities – which is evidently
politically wanted.
HELABA RESEARCH ·27 JANUARY 2015 · © HELABA
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FX FOCUS US DOLLAR
Helaba Currency Forecasts
Performance
year to date 1 month
vs. Euro
current*
Forecast horizon at end ...
Q1/2015
Q2/2015
Q3/2015
Q4/2015
(vs. Euro, %)
US dollar
7,7
8,4
Japanese yen
8,8
10,1
133
131
134
136
138
British pound
4,2
5,1
0,75
0,75
0,75
0,74
0,77
18,5
18,5
1,02
0,95
1,00
1,00
1,05
Canadian dollar
0,3
1,0
1,40
1,38
1,38
1,41
1,44
Australian dollar
4,4
5,8
1,42
1,41
1,41
1,44
1,45
New Zealand dollar
2,5
3,7
1,51
1,45
1,47
1,51
1,54
Swedish krona
1,1
2,4
9,34
9,35
9,20
9,00
8,90
Norwegian krone
2,8
3,7
8,77
8,80
8,60
8,50
8,30
1,6
118
119
122
118
115
Swiss franc
vs. US-Dollar
Japanese yen
1,12
1,10
1,10
1,15
1,20
(vs. USD, %)
1,1
Swiss franc
10,1
9,4
0,90
0,86
0,91
0,87
0,88
Canadian dollar
-6,8
-6,8
1,25
1,25
1,25
1,23
1,20
Swedish krona
-6,1
-5,5
8,31
8,50
8,36
7,83
7,42
Norwegian krone
-4,5
-4,3
7,80 1,57
8,00
7,82
7,39
6,92
US-Dollar vs. …
(vs. USD, %)
British pound
-3,2
-3,1
1,51
1,47
1,47
1,55
1,56
Australian dollar
-3,1
-2,4
0,79
0,78
0,78
0,80
0,83
New Zealand dollar
-4,8
-4,3
0,74
0,76
0,75
0,76
0,78
*26.01.2015
Sources: Bloomberg, Helaba Research 
HELABA RESEARCH ·27 JANUARY 2015 · © HELABA
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