Lehman Brothers, the fourth largest U.S. securities firm by market value, today lowered its forecast for the dollar against the euro due to increasing signs that the U.S. economy is slowing, reports Bloomberg.
[Editor's Note: A run on the dollar has already begun. Protect yourself now.]
The investment bank says the dollar, which is trading at 1.31 per euro in New York, will fall to $1.35 per euro by the end of June. It's previous forecast was for the dollar to trade at $1.33 per euro at mid-year.
In a research report, Lehman said the economic "backdrop for the dollar looks to be deteriorating once again. We remain tactically dollar bearish and are leaning towards further medium-run weakness as well."
Durable goods orders – goods expected to last one year or more – fell the most in three years in January, according to a government report. The news added to a wave of selling in the U.S. stock markets on Tuesday.
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The government also reported that new home sales plunged by the most in 13 years in January. Construction spending also dropped for the tenth month in a row in January, signaling that homebuilders don't expect new home sales to improve.
In addition, evidence that the subprime lending market is seeing rising defaults on mortgage loans and wreaking havoc on earnings is contributing to fears that the slumping housing market will spill over and slow the rest of the economy.
[Editor's Note: Warren Buffett: I’m Betting Billions On A Falling Dollar]
Plus, personal income numbers released yesterday showed core personal consumption expenditures (PCE) rising by the fastest amount in five months. The Fed closely watches this number for evidence of rising inflation.
Consumer confidence also weakened in February from a record high last month. The loss of equity from the housing bust and rising gas prices are eating away at consumers' expectations for the future.
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Editor's note:
Warren Buffett: I’m Betting Billions On A Falling Dollar
A run on the dollar has already begun. Protect yourself now.
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