https://www.cnbc.com/2020/06/15/dol...evitable-asia-expert-stephen-roach-warns.html ✕ CNBC › Why Stephen Roach is worried about a dollar crash STEPHANIE LANDSMAN JUNE 15, 2020The stronger dollar era may be on borrowed time. Stephen Roach, one of the world's leading authorities on Asia, is worried a changing global landscape paired with a massive U.S. budget deficit will spark a dollar crash. "The U.S. economy has been afflicted with some significant macro imbalances for a long time, namely a very low domestic savings rate and a chronic current account deficit," the former Morgan Stanley Asia chairman told CNBC's "Trading Nation" on Monday. "The dollar is going to fall very, very sharply." His forecast calls for a 35% drop against other major currencies. "These problems are going from bad to worse as we blow out the fiscal deficit in the years ahead," said Roach, a Yale University senior fellow. The U.S. Dollar Currency Index is up more than one percent over the past two weeks and is relatively flat so far this year. But Roach believes it's no time to get complacent. "The national savings rate is probably going to go deeper into negative territory than it has ever done for the United States or any leading economy in economic history," he said. Roach contends other forces are at play, too. 'Lethal combination' "At the same time, America is walking away from globalization and is focused on decoupling itself from the rest of the world," said Roach. "That's a lethal combination." The big question: Will it happen quickly or gradually? His timeline is rough — over the next year or two, maybe more. However, Roach suggests a crash virtually inevitable, and it's a risk investors shouldn't ignore. "Generally, it's a negative implication for U.S. financial assets," he added. "It points to the probability of higher inflation as we import more higher cost foreign goods from overseas, and that's a negative for interest rates." He's concerned a crash could spark a late 1970s-type stagflation crisis, when prices rose sharply while economic growth was muted. According to Roach, not even a leadership change in Washington in November would be able to move the needle much — especially as lawmakers try to battle the economic impact from the coronavirus crisis with unprecedented stimulus measures. "Policymakers to their credit have never had to deal with anything close to this disruption," Roach said. Trading Nation" on Monday. "The dollar is going to fall very, very sharply." His forecast calls for a 35% drop against other major currencies. "These problems are going from bad to worse as we blow out the fiscal deficit in the years ahead," said Roach, a Yale University senior fellow. The U.S. Dollar Currency Index is up more than one percent over the past two weeks and is relatively flat so far this year. But Roach believes it's no time to get complacent. "The national savings rate is probably going to go deeper into negative territory than it has ever done for the United States or any leading economy in economic history," he said. Roach contends other forces are at play, too. 'Lethal combination' "At the same time, America is walking away from globalization and is focused on decoupling itself from the rest of the world," said Roach. "That's a lethal combination." The big question: Will it happen quickly or gradually? His timeline is rough — over the next year or two, maybe more. However, Roach suggests a crash virtually inevitable, and it's a risk investors shouldn't ignore. "Generally, it's a negative implication for U.S. financial assets," he added. "It points to the probability of higher inflation as we import more higher cost foreign goods from overseas, and that's a negative for interest rates." He's concerned a crash could spark a late 1970s-type stagflation crisis, when prices rose sharply while economic growth was muted. According to Roach, not even a leadership change in Washington in November would be able to move the needle much — especially as lawmakers try to battle the economic impact from the coronavirus crisis with unprecedented stimulus measures. "Policymakers to their credit have never had to deal with anything close to this disruption," Roach said. Disclaimer
Folks have been calling a dollar collapse for years - especially since 2008 and USDX is up almost 50% since then. EUR and JPY have the same problems with large debts, deficits, and demographics, while interest rates are lower and not headed up in the foreseeable future. Nobody is going to move their savings into Yuan - on the contrary, wealthy Chinese are as desperate as ever to get their money out. It's going to take a lot more than the factors described in this article to get a 35% decline in the dollar, to say nothing of an actual crash.
Swiss Franc and Yen because they are funding currencies (risk-off plays) but also XAUUSD. Problem is you will get Dollars back from it after the hedge. XAUEUR is bad because the Euro is likely to decline too in that case. Alternatives are xurrency futures and options if you have acces to them
There is a big difference between wanting to hold your currency offshore and wanting too exchange your currency for another.
been looking at CAD myself but I don't like it's so tied to the US economy, no matter how comparatively strong their finances & COVID responses are.
“His timeline is rough — over the next year or two, maybe more.” LMAO Typical wall st guru nonsense. Keep calling for a crash and maybe you will be right and say “I called it”. I think FANG stocks will decline by 35% either this year or next year or within the next few years or maybe more. What a ballsy call! I can’t wait to come back here and bask in glory when it happens!!
Traders will be delighted if US$ (or whatever currency) crashes. that will provide trading opportunities. Always look out for opportunities, not problems. Don't fill your life with worries.