The dollar would depreciate by 35% against its major trading currencies such as the yen, British pound and euro.
That warning from former chairman of investment bank Morgan Stanley and professor Stephen Roach. “The dollar is going to fall very, very sharply,” said the former professor at Yale University.
The Chinese economy is getting stronger and trumps the United States. As Washington continues to withdraw from international trade and raise import taxes for trade with other countries, the dollar is losing international standing, said Roach, previously chief economist at Morgan Stanley. “A deadly combination,” is how he characterizes Washington’s attitude.
The corona crisis, which is still in the grip of the United States, is not becoming a root cause, but contributing to that weakening of the currency, he argues.
“The US economy has long suffered significant macro imbalances: very low domestic savings rates and a chronic current account deficit,” he told CNBC.
Leave safe harbor
A weak dollar seems good for trade, and is being pursued by President Trump, but in the long run, a big weakening is bad according to Roach.
Traditionally, the dollar is sought out by investors in a crisis. But that traditional role of safe haven will disappear, the economist says, as investors begin to see what the value will be in the future.
A weak dollar will have major consequences for stock and commodity trading, as relatively many investments are denominated in dollars.
Every morning the latest financial news in your inbox?
Invalid email address. Please enter again.
You can unsubscribe with 1 click