Showing posts with label Forex. Show all posts
Showing posts with label Forex. Show all posts
Tuesday, January 9, 2007
A Frightening Worldwide Currency Crisis
January 02, 2007
06:29
Economist and Author, David Morgan reenatcs a dramatic scene from the Movie "Rollover" (1981), a frightening worldwide currency crisis he says we should be prepared for in our lifetimes.
Wednesday, December 13, 2006
Rogers: Sell U.S. dollar, buy real and yuan
Tue Dec 12, 2006 11:57 AM ET
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - It's only a matter of time before the beleaguered U.S. dollar loses its status as the world's reserve currency and medium of exchange, U.S. fund manager and author Jim Rogers told Reuters in an interview.
"The dollar is a terribly flawed currency," said Rogers, who co-founded the Quantum hedge fund with billionaire investor George Soros in the 1970s.
He urged investors to switch to the Brazilian real and Chinese yuan instead.
"You should hold as few dollars as possible. The dollar's decline would go on for years to come," he added.
The dollar has so far lost nearly 12 percent against the euro this year, around 14 percent against sterling , and roughly 9 percent versus the Swiss franc , as investors became concerned that U.S. economic growth was slowing and that the interest rate differential with Europe may narrow.
Investors expect the Federal Reserve may cut the fed funds rate, currently at 5.25 percent, next year, eroding the greenback's yield advantage over other major currencies.
The market's renewed focus on the widening U.S. current account deficit, a measure of the country's trade and investment flows, has also contributed to the dollar's <.DXY> recent decline, analysts say.
Rogers further outlined a gloomy scenario for the once-mighty dollar.
"As recent as 1987, the United States was a creditor nation. We are now the largest debtor nation the world has ever seen," said Rogers.
"We owe the rest of the world over $13 trillion. And that's a terrifying thought. Our foreign debt is increasing at the rate of $1 trillion every 15 months," he added.
MORE WORTHY INVESTMENTS IN BRAZIL, CHINA, COMMODITIES
Rogers suggested holding currencies such as the Brazilian real, which has appreciated by about 3.1 percent against the dollar since late November.
"The Brazilian currency will probably do better than most currencies for a few years because it has so many commodities. It is a resource-based economy and Brazil is doing a better job these days," he added.
Most analysts also expect the Brazilian currency to remain strong, specifically in the first half of 2007 due to its sizable fiscal and current account surpluses. Merrill Lynch, for instance, believes conditions are set for Brazil's gross domestic product to accelerate in the fourth quarter and into 2007.
In a wide-ranging interview, Rogers, a long-time commodity bull who traveled around 116 countries in 2000-2002 in a yellow Mercedes coupe, suggested getting out of dollars and going into undervalued agricultural commodities.
"I suggest looking into coffee and soybeans. That's where you'll find the most value," said Rogers. He estimated that prices of agricultural commodities are more than 95 percent below their all-time highs when adjusted to inflation.
"We have a looming food shortage. The world is consuming more food and that it is producing. The inventories are the lowest since 1972 and the number of hectarage devoted to agricultural products has been declining," he noted.
Rogers also talked about one of his favorite topics -- China. He said the 19th century belonged to the British, the 20th century to America, and the 21st century will be owned by China.
He traveled through China by motorcycle and car in the 1990s researching investment ideas and collecting material for his books.
He said he is currently invested in the renminbi and Chinese stocks and is planning to move to Asia in the near future to take advantage of the region's growth story.
Rogers said the Chinese yuan could potentially replace the dollar as the world's reserve currency in about 15-20 years provided the currency becomes freely convertible.
"The renminbi would go higher over the years. they have a huge balance of payments surplus and it's the largest creditor nation in the world."
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - It's only a matter of time before the beleaguered U.S. dollar loses its status as the world's reserve currency and medium of exchange, U.S. fund manager and author Jim Rogers told Reuters in an interview.
"The dollar is a terribly flawed currency," said Rogers, who co-founded the Quantum hedge fund with billionaire investor George Soros in the 1970s.
He urged investors to switch to the Brazilian real
"You should hold as few dollars as possible. The dollar's decline would go on for years to come," he added.
The dollar has so far lost nearly 12 percent against the euro
Investors expect the Federal Reserve may cut the fed funds rate, currently at 5.25 percent, next year, eroding the greenback's yield advantage over other major currencies.
The market's renewed focus on the widening U.S. current account deficit, a measure of the country's trade and investment flows, has also contributed to the dollar's <.DXY> recent decline, analysts say.
Rogers further outlined a gloomy scenario for the once-mighty dollar.
"As recent as 1987, the United States was a creditor nation. We are now the largest debtor nation the world has ever seen," said Rogers.
"We owe the rest of the world over $13 trillion. And that's a terrifying thought. Our foreign debt is increasing at the rate of $1 trillion every 15 months," he added.
MORE WORTHY INVESTMENTS IN BRAZIL, CHINA, COMMODITIES
Rogers suggested holding currencies such as the Brazilian real
"The Brazilian currency will probably do better than most currencies for a few years because it has so many commodities. It is a resource-based economy and Brazil is doing a better job these days," he added.
Most analysts also expect the Brazilian currency to remain strong, specifically in the first half of 2007 due to its sizable fiscal and current account surpluses. Merrill Lynch, for instance, believes conditions are set for Brazil's gross domestic product to accelerate in the fourth quarter and into 2007.
In a wide-ranging interview, Rogers, a long-time commodity bull who traveled around 116 countries in 2000-2002 in a yellow Mercedes coupe, suggested getting out of dollars and going into undervalued agricultural commodities.
"I suggest looking into coffee and soybeans. That's where you'll find the most value," said Rogers. He estimated that prices of agricultural commodities are more than 95 percent below their all-time highs when adjusted to inflation.
"We have a looming food shortage. The world is consuming more food and that it is producing. The inventories are the lowest since 1972 and the number of hectarage devoted to agricultural products has been declining," he noted.
Rogers also talked about one of his favorite topics -- China. He said the 19th century belonged to the British, the 20th century to America, and the 21st century will be owned by China.
He traveled through China by motorcycle and car in the 1990s researching investment ideas and collecting material for his books.
He said he is currently invested in the renminbi and Chinese stocks and is planning to move to Asia in the near future to take advantage of the region's growth story.
Rogers said the Chinese yuan could potentially replace the dollar as the world's reserve currency in about 15-20 years provided the currency becomes freely convertible.
"The renminbi would go higher over the years. they have a huge balance of payments surplus and it's the largest creditor nation in the world."
Thursday, December 7, 2006
China sounds alarm on falling greenback
Friday, December 08, 2006
China's central bank issued a warning Thursday about the risks of dollar weakness, piling fresh pressure on the US currency after a steep drop over the past few weeks.
The warning was contained in the full version of the central bank's 2006 financial stability report, which it posted on its Web site.
The warning was contained in the full version of the central bank's 2006 financial stability report, which it posted on its Web site.
"If external capital stops flowing into the United States, a significant drop in the US dollar may occur with consumption and investment shrinking, interest rates rising and financial markets experiencing turbulence - endangering global financial and economic stability," the report said.
The central bank, holder of the world's largest foreign currency reserves, said more capital will flow into China as the US dollar weakens and fund managers dump dollar-denominated assets.
Inflows of cash have undermined efforts to cool growth in the world's fastest growing major economy and increased the risk that banks will be saddled with bad loans, the bank said.
The country's trade surplus, forecast by the government to swell 65 percent to a record US$168 billion (HK$1.31 trillion) this year, has flooded the economy with funds and sparked calls by trading partners for faster gains in the yuan. China's October money supply unexpectedly accelerated for the first month in five.
"Everyone's looking for excuses to get out of the dollar and bet on more Asian currency strength, and this provides it," said Claudio Piron, head of Asian currency research at JPMorgan Chase Bank in Singapore.
"It's providing support for all the Asian currencies."
The world economy has been enjoying the strongest sustained growth in 30 years, even as the US current account deficit steadily widens and surpluses grow in Asia and oil- producing countries. But the People's Bank of China said the longer the imbalances persist, the greater the risk of a disorderly adjustment and of damage to the world economy.
"If the US current account deficit continues to grow faster than GDP, then the investment value of US assets may be subjected to doubts and challenges and the willingness of investors to continue holding and buying US financial products may weaken," the central bank said.
After marking time for months, the dollar has now lost 2.5 percent against the yen in less than three weeks, 3.6 percent against the euro and 4 percent against the British pound.
The Chinese central bank also said it saw a chance that Asian and oil- producing countries would adjust their foreign currency reserve portfolios.
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