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Ramalan Runtuhnya Dollar

Posted by sroestam pada 27 April 2009

Debt Markets

The Coming Dollar Collapse

Matthew Craft

Inflation fears have many predicting a large dollar drop. One Federated portfolio manager is prepared.


Budget busting government spending, trillions in Treasury debt and the lowest interest rates on record have many worried about inflation and the damage it could inflict on the dollar once the global economy recovers. Ihab Salib, who oversees $3.5 billion in bond funds at Federated Investors in Pittsburgh, has already started laying his bets.

Salib has taken positions in favor of commodity-rich countries and against those whose central banks have taken to cutting rates and buying assets from banks, the tactic known as quantitative easing. That means he has taken a shine to Australia, Venezuela and Brazil, which stand to benefit from a falling dollar through higher commodity prices, and is wary of the United Kingdom and Switzerland. He avoids U.S. dollar assets when he can. One fund carries no dollar exposure at all (see Betting On The Buck).

The knocks against the dollar are rooted in classical economic theory — the Federal Reserve and Treasury have flooded the world with greenbacks. Because the dollar is a reserve currency and because US Treasury debt has virtually no default risk, investors have sucked up as many dollars as the US has been willing to provide. But that’s sidelined money. Eventually international investors are going to want to sell dollars and buy performing assets.

Or, those investors are going to realize that they have too much dollar risk and are going to seek diversity by holding other currencies. This will drive foreign currencies higher against the dollar. As foreign currencies rise, particularly in the emerging markets, resource demand from the developing world, coupled with increased demand from the U.S., could drive commodities prices higher again.

We saw some of this in 2008 though commodities prices were also driven by speculation from highly leveraged hedge funds. This is one of the reasons that commodities prices spiked so sharply and then fell so quickly when the credit crisis hit and hedge funds were forced to sell securities to meet margin requirements as prime brokers forced them to deleverage.

At the moment , governments and central banks in the US are more concerned about deflation as falling demand has brought consumer and commodities prices lower so they’ve cut interest rates and printed money to try and counter the trend.

“When you do that, your currency doesn’t fare very well,” Salib says.

When the recession ends, investors’ willingness to take on risk and look abroad will also push against the dollar and the Japanese Yen, the two safe havens’ currencies. His retail international bond fund has 22% of its assets in Japan, versus 43% for his benchmark. The Japanese Yen hit a 13-year high against the dollar last year when investors rushed to pay off Yen-denominated debt used to pay for purchases elsewhere (see Yen Works Like A Stock Barometer).


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