Homepage / Investment / Three reasons the world could turn its back on the US dollar
Facebook takes another shot at grabbing social media stars from YouTube UK says it is happy with Rupert Murdoch's Sky News commitments related to bid for parent company Apple CEO Tim Cook says separating immigrant children at US border is 'inhumane' In the short history of Trump trade conflicts, it has paid to buy the market dip Danny Meyer stands by cashless push: 'We're unaware of any federal law' that requires accepting cash Express Scripts boots another online pharmacy — CareZone — from its network Home Depot and two other Dow stocks look ripe for a buy, says technician Snap shares plunge after analyst says users are less engaged White House's Navarro on China trade talks: No knowledge of Apple iPhone exemption Merkel, Macron agree on euro zone budget Walgreens and Humana are partnering to create senior health hubs Sarepta Therapeutics shares soar 50% on positive preliminary results for muscular dystrophy gene therapy Verizon pledges to stop some selling of phone-location data There's one Dow stock having a great day: Verizon Europe's IPO market heats up, and unicorns are getting in line Amazon wants a hand in all your deliveries, unveils last-step option for FedEx, UPS and private mail Soybean prices drop to two-year low on US-China trade war fears Cramer: US-China trade fight 'is not serious' right now; Trump has upper hand China has a limited number of weapons to use in a trade war with the US Laws governing medical marijuana could soon be relaxed in the UK The flip phone is about to make a big comeback as foldable screen nears reality Here is what a student could have made if they invested their 2014 summer earnings in FANG stocks VW names interim Audi boss, seeking to steady brand after its CEO's arrest Here’s the fundamental error in Trump’s trade strategy Chip stocks dive on trade war fears as industry gets a majority of its revenue from China New home construction booms to a near 11-year high in May A dangerous dot-com era phenomenon is back and it's going to inflict pain, Jim Paulsen warns Netflix gets a $500 price target, the highest on Wall Street Apple is the big tech firm most at risk from a US-China trade war AT&T promises fewer ads, tailored programming after merger with Time Warner Stocks making the biggest moves premarket: VZ, TSLA, AAPL, WFC, T, SIRI & more Billionaire Howard Marks: Computers won't put the best human investors out of business CVS introduces prescription drug delivery as it braces for Amazon's possible entry Former turnaround exec Bozoma Saint John: Uber was 'the poster child for everything gone wrong' Trump told Tim Cook that US would not place tariffs on iPhones, but Apple's still worried Amazon's Alexa will now be your butler at Marriott hotels Billionaire investor Jim Mellon: Sharp sell-off in US stocks is the start of a 'very major correction' South Africa will avoid a ‘knee-jerk’ reaction to currency weakness, central bank deputy says Dow futures tumble as China responds to latest Trump threat North Korea's Kim visits Beijing as South Korea and the US halt military drills 'Belligerent' US trade stance could hurt America's iconic companies the most, Jim O'Neill says Irish central banker says it's too early for the ECB to discuss future rate hikes All global currencies will become cryptocurrencies, Circle CEO says Abu Dhabi Financial Group unit offers to buy Abraaj's investment management arm Beijing subways could get facial recognition and palm scanning tech, Chinese media reports Roche agrees to pay $2.4 billion to buy the rest of Foundation Medicine Japanese e-commerce company Mercari surges more than 70% in Tokyo debut European markets seen sharply lower as Trump threatens new tariffs China's central bank delivers surprise stimulus as trade spat with US worsens Shares of China's ZTE sink 23% after US Senate targets company in new bill Has a US-China trade war begun? Experts weigh in North Korean leader Kim Jong Un is in China on a two-day visit: Chinese state media China pledges it will fight back firmly if Trump goes ahead and publishes list of additional tariffs Trump reportedly told Apple's Tim Cook that iPhones will be spared from China tariffs Smartphone maker Xiaomi to postpone mainland China listing until after Hong Kong IPO Asian shares poised to edge higher despite trade jitters; oil prices rise Senate passes military funding bill that would reimpose sanctions on Chinese telecom ZTE Cramer Remix: Tariff headlines have investors flocking to these stocks Cramer's warning on recent tech IPOs: Be careful with their sky-high valuations Elon Musk sends company email about 'extensive and damaging sabotage' by employee Elon Musk sent an email to Tesla employees about another fire in its factory on Sunday Microsoft condemns 'forcible separation' of children from families after criticism of work with ICE Snap CEO Evan Spiegel says even his wife, Miranda Kerr, hated the app’s redesign UBS CEO: Blockchain technology almost a must have for business Bitcoin jumps after New York approves Square's Cash app for crypto trading Apple is worried about Chinese tariff retaliation that could hamstring its supply chain Elon Musk tells shorts on Twitter they have 3 weeks to cover Watch these drones string power lines along poles high above the ground SurveyMonkey confidentially files for IPO President Trump signs space junk directive aimed at cleaning up the cosmos Dropbox rises more than 8% adding to last week's gains President Trump directs Defense Department to 'immediately begin the process' of establishing 'Space Force' as sixth military branch Elon Musk hung out in the Netscape lobby in the '90s hoping to get a job Square gets regulatory green light for cryptocurrency trading in New York Domo drops below billion-dollar valuation in lead-up to IPO Russia cuts Treasury holdings in half as foreigners start losing appetite for US debt With Twitch, Amazon tightens its grip on live streams of video games This fitness app wants you to have a personal trainer in your pocket Intel shares fall after small Wall Street firm downgrades chipmaker, predicting slower growth Rent-A-Center shares surge 22% in single day on buyout Snap CEO Evan Spiegel on Facebook imitations: 'The innovators win in the long run' Amazon to add over 1,000 jobs in Ireland in country's biggest staff boost this year Supreme Court mulls Apple's App Store commissions in antitrust case JP Morgan says buy Micron into earnings due to ‘robust’ cloud computing spending Germany's Merkel given two weeks to reach EU deal on migrants Disney is expected to add cash to its bid for Twenty-First Century Fox assets: Sources How to play rising interest rates based on your age Microsoft acquires education start-up Flipgrid in latest challenge to Google BJ's Wholesale expects its IPO to price at $15 to $17 a share Don't even think about investing without a diversification strategy: Advisor Boeing sell-off looks like the beginning of a correction, technical analyst says Mass facial recognition boom led by the Chinese government will mean big money for Nvidia, UBS says Goldman Sachs still sees oil rallying over $80 despite market concerns over key OPEC meeting Disney shares downgraded to sell on concern the battle for Fox has placed company in an unwinnable situation Chipmaker Mellanox nears truce with activist investor Starboard over board seats Rates are on the rise, but don’t fear for the stock market — yet We’re seeing the greatest asset inflation bubble in 20 years, fund manager warns Apple will automatically share a user's location with emergency services when they call 911 Investors still love equities but ‘market fragility’ could be ahead in the second half of 2018 Munich prosecutors say Audi CEO arrested on risk he may suppress evidence

Investment

Three reasons the world could turn its back on the US dollar

A combination of geopolitical pressures could spark the end of the U.S. dollar as the world’s reserve currency, according to the head of FX strategy at Saxo Bank.

In a quarterly outlook note titled “The world is turning its back on the almighty dollar,” John Hardy claimed the U.S. currency was “increasingly dysfunctional” and there was an urgent need to replace it.

The currencies analyst highlighted these three geopolitical issues currently putting pressure on the dollar’s status:

  • The ongoing rise of China as it assumes a more prominent role in global trade and financial markets and in particular how it will manage policy and unwinding the excesses of its credit bubble in the wake of the 19th Party Congress scheduled for October 2017 without upsetting its domestic economy and the global economy,
  • The North Korean regimes striving to maintain credibility and untouchability as a nuclear power and how this impacts China-U.S. relations, but also how Japan deals with this threat in terms of domestic as well as foreign policy,
  • The loosening of the U.S.-Europe transatlantic alliance and how Europe and the EU finds its feet as a more independent superpower — or not — in its own right after the German elections

Hardy extracts “de-dollarization” as a direct theme that can be pulled from China’s situation as the country looks to encourage demand for its yuan.

“China is eyeing the benefits of having its own currency play a larger role and to supplant the USD’s role in global trade,” he said. “The initial focus is on the global oil trade, where it has announced the intention of buying oil in yuan and allowing trade partners to settle that yuan in gold.”

Hardy said settling in gold is a clever move by Beijing as it provides oil-exporting countries with a greater degree of comfort.

China is the world’s largest importer of crude and the analyst forecasted that maintaining a stable currency while buying oil in yuan will be the first steps to increased global demand for renminbi.

“Russia and Iran, long suffering at the hands of U.S. financial and trade sanctions, will be happy participants in this scheme and could provide critical mass. The bigger test will be whether traditional U.S. allies, such as Saudi Arabia, would be willing to risk the ire and financial might of the U.S. by agreeing to receive yuan for oil,” said Hardy.

On the second two bullet points, the analyst said Europe and Japan will seek less reliance on the U.S. dollar as they increasingly turn to fiscal policy to solve domestic issues.

“More forcefully so than in the U.S., where the political dysfunction of Trump could mean very little dynamism and only a weak response from the Fed — this leaves the USD out in the cold for different reasons — and having a harder time finding funding for increasing deficits because the rest of the world has its own agenda,” Hardy said via email Wednesday.

The analyst said Europe’s fiscal spend would focus on defense shortcomings while Japan would look to pull the trigger on a 2 trillion yen ($17.8 bn) stimulus plan.

Short-term dollar outlook

Hardy added that although his long-term outlook for the dollar was negative, there could be some short-term gains in relation to the appointment of the next Federal Reserve chair.

“Tax reform if it does prove to be Kevin Warsh (as next Fed chair), for example, you could get a bump on the dollar prospects,” he said. “But further down if we are looking at 1.25 or 1.30 it is a question of entry levels for euro-dollar bulls to get involved rather than tactical buys for the dollar,” he said.

Source: Investment Cnbc
Three reasons the world could turn its back on the US dollar

Comments are closed.