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Dollar to Hit 50 Yen, Cease as Reserve

  1. Oct. 15 (Bloomberg) -- The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

    “The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

    The dollar last week dropped to the lowest in almost a year against the yen as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, has fallen 15 percent from its peak this year to as low as 75.211 today, the lowest since August 2008.

    The gauge is about five points away from its record low in March 2008, and the dollar is 2.5 percent away from a 14-year low against the yen.

    “We can no longer stop the big wave of dollar weakness,” said Uno, who correctly predicted the dollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7,000 after the bankruptcy of Lehman Brothers Holdings Inc. last year. If the U.S. currency breaks through record levels, “there will be no downside limit, and even coordinated intervention won’t work,” he said.

    China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency. Hossein Ghazavi, Iran’s deputy central bank chief, said on Sept. 13 the euro has overtaken the dollar as the main currency of Iran’s foreign reserves.

    Elliott Wave

    The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back.

    The dollar is now at wave five of the 40-year cycle, Uno said. It dropped to 92 yen during wave one that ended in March 1973. The dollar will target 50 yen during the current wave, based on multiplying 92 with 0.764, a number in the Fibonacci sequence, and subtracting from the 123.17 yen level seen in the second quarter of 2007, according to Uno.

    The Elliot Wave was developed by accountant Ralph Nelson Elliott during the Great Depression. Wave sizes are often related by a series of numbers known as the Fibonacci sequence, pioneered by 13th century mathematician Leonardo Pisano, who discerned them from proportions found in nature.

    Uno said after the dollar loses its reserve currency status, the U.S., Europe and Asia will form separate economic blocs. The International Monetary Fund’s special drawing rights may be used as a temporary measure, and global currency trading will shrink in the long run, he said.

  2. Holy moly 50 yen we f^&*ked
  3. Oil should touch all time highs with those estimates.

    Throw in a strike on Iran, which is 80% likely, and we're looking at $250 barrel oil by 2011.

  4. This would cause Great Depression II. There's no doubt.
  5. Japan has its own problems.

    David Einhorn and Kyle Bass, among others, have both placed wagers on way higher JGB rates and hyperinflation in Japan as the gov't debt load combined w/an aging population and a slow economy threaten to overwhelm the govt's ability to pay.
  6. This is really scary. If the "exit plan" is to devalue the dollar (or allow it to devalue) we are really f*****

    I hope that the FED will know better than that and start defending the dollar before it is too late (too late = inflation (maybe rampant) + end of use of dollar as reserve currency + some demoralization of the USA + possible chaos)

  7. interesting that this guy is using elliot wave to back up his assertion that the dollar is toast while prechter, the most well known elliot waver, is saying the dollar is making a multi year bottom.
  8. How do you americans feel that your currency is being decimated.

    Does it make you warm and fuzzy or are you about to get a gun and blow bernanke's head off? :]

  9. $250 oil, whew. Forget about any future growth in this economy if oil starts to get higher then $100. I don't care what anyone says, if oil gets back to triple digits this economy isn't going anywhere. Falling dollar, skyrocketing commodities, no inflation.... Righhhhtttttttt.
  10. What is Japan going to be able to export to the US at USD/JPY 50? Japan's exporters are already hurting at USD/JPY 90. From the chart, it looks like USD weakness against JPY has bottomed and USD is beginning to strengthen.
  11. No matter what happens to the dollar one thing will stay the same for quite some time. The world needs the U.S. a lot more than the U.S. needs the world.

    Let's just bring home all our millitary, stop all foreign aid and use our troops to defend our boarders, then watch the rest of the world go to hell in a handbasket.

    Let's stop educating foreign nationals in our universities and restrict all work visa's and citizenship naturalizations to engineers and others who will contribute greatly to our economy.

    Let's stop distributing our drugs to other countries at bargain prices that we pay dearly for so research can continue.

    While we are at it, let's stop paying billions to the U.N. every year and kick those sick SOB's off this continent.

    We can put a missle on a dime anywhere on this planet. We can spend the money to use that technology to defend ourselves anywhere in the world. Supplement missles with kenetic rods in space orbit. Near the power of an atomic bomb with zero explosive in them.

  12. When an author tells he is on Elliot Wave, be wary :(

    The real world is not so neatly amenable through technical analysis.
  13. ooh boy, poor japanese

    they have their economy halted for 20 years and now they get a 100% currency appreciation against their major trade partner... they'll certainly implode then!

    get a grip guys