In a research report issued here on Thursday, the American financial institution Merrill Lynch sees the U.S. dollar moderately strong in 2009, given that the U.S. current account gap shrinks as the economic downturn continues in U.S.

The ML experts forecast a U.S. current account deficit for 2009 at around 2.2 percent of GDP. "As the current account shrinks fast and U.S. dollar demand arises in a risk averse world, we are moderately positive on the dollar," the ML global currency strategy group said in the report.

The report also stressed that the process of European banking sector de-leveraging is likely to generate significant U.S. dollar demand over the months ahead, which will support the U.S. dollar against many other currencies.

However, once the policies embraced by U.S. government take effect and the economic outlook turns better, the U.S. dollar will become vulnerable. "This is probably a 2010 story," the experts said.

Merrill Lynch forecasts the U.S. dollar to reach 1.26 against the Euro by the end of 2009.

(Xinhua News Agency February 19, 2009)