Economy 03-12-2018

Time to start shaking? They forecast a 30% drop in the dollar

Recently, the US currency fell sharply in response to statements by Fed chief Jerome Powell. The financiers react calmly to this type of fluctuations, but warn that by the end of 2019, the dollar will enter a downward trajectory for many years.

The comment that most moved the market during the past week was the one of the president of the Federal Reserve, Jerome Powell, who said that the interest rates "stay just below the wide range of estimations of the level that would be neutral for the economy" , says the Bloomberg agency.

Meanwhile, analysts at JPMorgan Chase calculated how changes in US monetary policy will affect the price of the dollar. According to his estimates, the fall will begin at the end of next year and the US currency will no longer be able to oppose the downward trend, so the fall will last several years.

This trend is due to the slowdown in the US economy and a pause in the cycle of the Federal Reserve's rate hike in the second half of the year.

"In the end, we will have a downward movement of the dollar for many years, in the second half of next year, if the Fed really takes a break, the economy will slow down and the rest of the world will stabilize, we will see a decline in the American currency, " the agency quoted JP Morgan global strategist Gabriela Santos as saying .

According to analysts at JPMorgan, the US economy will slow down. "A slowdown in the growth of the economy of 2% is a scenario in which the dollar could suffer a fall for several years," say economists.

One of the leading US financiers, founder of the largest hedge fund in the world, Bridgewater Associates, billionaire Ray Dalio, is also sure that the economic situation does not bode well for the dollar.

According to Dalio, the US deficit will scare away foreign buyers of Treasury bonds, which will cause an explosive increase in profitability and a dramatic drop of the dollar by 30%.

In this case, the US currency will inevitably lose the state of the world reserve currency, says the investor. Dalio says that this scenario would be the "worst nightmare" for the United States.

"The role of the dollar will decrease, and the performance of US dollar-denominated debt will be affected, and we will see how other currencies appear." Dalio does not specify which currencies it is because, according to him, it is a topic of conversation that is too broad.

The financier also highlights that gold is one of the most reliable tools to cover monetary and political risks. And there is a rational explanation for this: in the case of a collapse of the dollar system, gold will not depreciate. While maintaining the role of a payment tool in world trade, this asset reduces dependence on any currency.

No wonder Russia opts for dollar bullion. The gold reserve has already reached a record level, while the part of the treasury bonds in the international reserves of the Central Bank of Russia is being reduced to zero .

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