BofA says dollar on its way back up

The dollar may have reached a “major trough” and is poised to rise in 2008 after declining for more than six years, according to Bank of America Corp.

The dollar was undervalued by 13% as of Dec. 3 versus the currencies of the world’s eight major economies, according to the bank’s models, and that degree of divergence resembles dollar lows in 1987 and 1995, the bank said in a note to clients.

“There is fundamental background support to suggest a major trough” for the dollar, Robert Sinche, the bank’s head of global currency strategy in New York, wrote in the report. The dollar “is likely to post a modest recovery in 2008.”

In Thursday trading, the dollar was mixed against other major currencies.

An index of the dollar’s value against six major peers set a record low Nov. 23. It has lost 8.7% this year.