The dollar has lost almost 10 percent of its value over the past two months, and the slide shows no signs of abating, the Vedomosti newspaper reports. Many Western analysts expect the dollar to fall further, and Russia is also preparing for the weakening of the US currency.
The dollar began falling in late September after the US posted a record 2004 budget deficit of $413bn and a Q2 current account deficit of $166bn.
EU and Japan, worried about the dollar’s fall, offered the US joint interventions to support the American currency. But Washington rejected the offer, prompting a new wave of dollar sales by investors.
On Wednesday last week, Alexey Ulyukayev, Senior Deputy Chairman of the Russian Central Bank, said the percentage of euros in Russia’s gold and foreign currency reserves(currently more than $113bn) could be increased. On Thursday, leading international banks UBS, JP Morgan Chase and Merrill Lynch lowered their forecasts for the dollar. UBS analysts said the euro could rise to 1.36 USD/EUR, JP Morgan Chase analysts forecast an exchange rate of 1.37 USD/EUR, and Merrill Lynch expects to euro to go up to 1.39 USD/EUR.
According to Paul Megguesi, a currency analyst with JP Morgan, the dollar will be falling until politicians say “enough”. Merrill Lynch put the ‘pain threshold’ of European politicians at 1.35 USD/EUR to 1.4 USD/EUR, and 90 YEN/USD to 95 YEN/USD for the Japanese. After the forecasts were released, the dollar dropped to 1.32 USD/EUR.
Another factor that affected the dollar’s exchange rate was an article in the China Business News newspaper about Beijing's plans to reduce its portfolio of US treasury bonds. As a result, the dollar dropped to 1.3329 USD/EUR, and the yen fell to 102.14 YEN/USD.
For their part, Citigroup analysts think the dollar will weaken to 1.35 USD/EUR over the next three months. UBS says the euro will strengthen to 1.4 USD/EUR by December 2005, and it will rise to 1.5 USD/EUR by December 2006. Credit Suisse First Boston issued the most conservative forecast of 1.3 USD/EUR (by December 2005).
According to Vedomosti, Russian bankers do not trust the dollar. Vitaly Buzoverya of Deutsche Bank in Moscow says the ruble will strengthen to 28 RUR/USD to 28.2 RUR/USD by the end of the year. He noted that it was due not only to the dollar’s weakening on international markets but also to the Central Bank’s policy of curbing inflation. Natalya Orlova, chief economist at Alfa Bank, does not rule out that the dollar could weaken to 28 RUR/USD over the next month.
The dollar has lost almost 10 percent of its value over the past two months, and the slide shows no signs of abating, the Vedomosti newspaper reports. Many Western analysts expect the dollar to fall further, and Russia is also preparing for the weakening of the US currency. 
