Tweet
Mr Yen: “The dollar may plunge in 2008″
Oct 18 10:28
by Sam Jones
Comment
IMF economists asserted that the dollar was still overvalued on Thursday - putting pay to comments made last week by outgoing IMF director, Rodrigo Rato. And amid figures showing Asian economies are ditching dollar-denominated securities, More…
IMF economists asserted that the dollar was still overvalued on Thursday - putting pay to comments made last week by outgoing IMF director, Rodrigo Rato. And amid figures showing Asian economies are ditching dollar-denominated securities, the doyen of the Yen, Eisuke Sakakibara, said the dollar would “plunge” in 2008, if US growth slowed any further.
Mr Sakakibara is Japan’s former top currency official, and according to Bloomberg, warned of a dollar firesale if economic growth forecasts for America dropped below 1 per cent. The IMF cut the US forecast to 1.9 per cent on Wednesday - down from a July estimate of 2.8 per cent.
Sakakibara, who is currently a professor at Tokyo’s Waseda University said that “Some form of intervention would be necessary to stop it, and that would require coordinated effort from all three major economies.”
Which is, of course, deeply foreboding. Sakakibara is not a lone voice either. His remarks echo comments made by Merrill Lynch. The bank’s economic research team produced a report last week on sovereign wealth funds which also predicted the demise of the dollar. Its predictions included some kind of international agreement akin to the Washington treaty that sealed the fate of the gold standard:
The Washington Gold Agreement was implemented to provide a structure to central bank gold sales. This signalled a base in the price of gold. Similarly, we believe that central banks will ultimately come to some agreement on USD sales to limit the risk that USD selling becomes a downward spiral. Until this time the USD may be subject to periodic episodes of intense pressure and face an uphill struggle when cyclical influences would normally favor it.
The latest figures from the Treasury department don’t look great either. In August, China’s ownership of U.S. government bonds fell by 2.2 percent to $400 billion, the fastest pace since April 2002. Taiwan’s slid 8.9 percent to $52 billion , the most since October 2000. But Japan dumped the most, shedding $23bn of T-bills. Mr Yen’s compatriots seem to agree with him.
But take heart! Alan’s still on side. Bloomberg also report that the former Fed chair told an exclusive audience in Seoul (the media were barred) that he felt the dollar could weather the turbulence. “His view is that the markets are clever enough not to overreact,'’ said one participant. Which makes us wonder, what Mr Greenspan now makes of this summer’s events?
http://ftalphaville.ft.com/
Oct 18 10:28
by Sam Jones
Comment
IMF economists asserted that the dollar was still overvalued on Thursday - putting pay to comments made last week by outgoing IMF director, Rodrigo Rato. And amid figures showing Asian economies are ditching dollar-denominated securities, More…
IMF economists asserted that the dollar was still overvalued on Thursday - putting pay to comments made last week by outgoing IMF director, Rodrigo Rato. And amid figures showing Asian economies are ditching dollar-denominated securities, the doyen of the Yen, Eisuke Sakakibara, said the dollar would “plunge” in 2008, if US growth slowed any further.
Mr Sakakibara is Japan’s former top currency official, and according to Bloomberg, warned of a dollar firesale if economic growth forecasts for America dropped below 1 per cent. The IMF cut the US forecast to 1.9 per cent on Wednesday - down from a July estimate of 2.8 per cent.
Sakakibara, who is currently a professor at Tokyo’s Waseda University said that “Some form of intervention would be necessary to stop it, and that would require coordinated effort from all three major economies.”
Which is, of course, deeply foreboding. Sakakibara is not a lone voice either. His remarks echo comments made by Merrill Lynch. The bank’s economic research team produced a report last week on sovereign wealth funds which also predicted the demise of the dollar. Its predictions included some kind of international agreement akin to the Washington treaty that sealed the fate of the gold standard:
The Washington Gold Agreement was implemented to provide a structure to central bank gold sales. This signalled a base in the price of gold. Similarly, we believe that central banks will ultimately come to some agreement on USD sales to limit the risk that USD selling becomes a downward spiral. Until this time the USD may be subject to periodic episodes of intense pressure and face an uphill struggle when cyclical influences would normally favor it.
The latest figures from the Treasury department don’t look great either. In August, China’s ownership of U.S. government bonds fell by 2.2 percent to $400 billion, the fastest pace since April 2002. Taiwan’s slid 8.9 percent to $52 billion , the most since October 2000. But Japan dumped the most, shedding $23bn of T-bills. Mr Yen’s compatriots seem to agree with him.
But take heart! Alan’s still on side. Bloomberg also report that the former Fed chair told an exclusive audience in Seoul (the media were barred) that he felt the dollar could weather the turbulence. “His view is that the markets are clever enough not to overreact,'’ said one participant. Which makes us wonder, what Mr Greenspan now makes of this summer’s events?
http://ftalphaville.ft.com/
Comment