Goldman Sachs Holds to Strong Dollar Call Amid Drop (Correct)

Goldman Sachs Group Inc. is holding fast to its dollar bullish stance, unmoved by the biggest three-week slide for...

Goldman Sachs Group Inc. is holding fast to its dollar bullish stance, unmoved by the biggest three-week slide for a measure of the currency in more than four years.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, has dropped 3.5 percent since Feb. 29 as a cautious policy approach by the Federal Reserve undermined demand for the currency. While the Fed signaled an expectation for two interest-rate increases this year, economists at Goldman are predicting stronger economic outcomes will force policy makers into three hikes. Net bets on gains for the greenback versus eight counterparts dropped to the least since 2014 in the run-up to the last Fed meeting, data from the Commodity Futures Trading Commission show.

“The underlying case for the divergence trade is stronger, not weaker, given that a dovish Fed will spur U.S. outperformance versus the euro zone and Japan,” wrote Goldman analysts led by Robin Brooks, the New York-based head of currency strategy. “Going up is hard to do, but the dollar will go up.”

The U.S. currency weakened 0.1 percent to 111.48 yen as of 6:48 a.m. in Singapore after touching 110.67 on March 17, its weakest since October 2014. It was little changed at $1.1274 per euro from $1.1270. The Bloomberg dollar index was at 1,186.33 after dropping 1.3 percent last week to 1,186.21.

Japanese markets are closed today for a public holiday.

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(Corrects yen low in fifth paragraph.)

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net. To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net.

By: Candice Zachariahs

©2016 Bloomberg News

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