Rabobank - "The USD ended 2012 as the second worst performing G10 currency after the JPY. The weaker tone of these ‘safe-haven’ currencies is suggestive of the better tone in risk appetite that was also pushing down yields in credit markets and supporting stock market indices during the second half of last year, despite the gloomy economic outlook for many regions. Although the USD found a little support at the start of this year from speculation that the Federal Reserve could withdraw for QE sooner than had been expected, we anticipate that generous levels of liquidity will ensure that investors continue their hunt for yield this year. On the assumption that risk appetite remains elevated, the USD (and the yen) are likely to continue to perform as funding currencies. This implies that the USD is likely to remain on the back foot. While we see scope for EUR/USD to trend modestly higher this year, there are risk of pullbacks in Q1 either on a re-emergence in tensions in EMU or potentially on speculation that the ECB may be poised to cut rates again. We are forecasting a pullback towards EUR/USD1.28 on a 3 mth view but expect EUR/USD to end the year around EUR/USD1.3500."