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PIMCO: ‘Disorderly Decline’ of Dollar Cannot Be Ruled Out
http://www.bloomberg.com/apps/news?pid=20601083&sid=a83XY0Ek_Bvo
‘Disorderly Decline’ of Dollar Cannot Be Ruled Out
By Matthew Brown
Oct. 22 (Bloomberg) -- A “disorderly decline” of the dollar, leading to the end of its reserve-currency status, cannot be ruled out, Pacific Investment Management Co. said.
An orderly dollar decline is the “most likely scenario,” Richard Clarida, a Newport-Beach, California-based global strategic adviser at Pimco, wrote in a note to clients today. “A disorderly decline, while unlikely, cannot be ruled out.”
The Dollar Index, used by InterContinental Exchange Inc. to measure the U.S. currency against the euro, pound, yen, Swedish krona, Canadian dollar and Swiss franc, lost 7.4 percent this year and 35 percent since the beginning of 2002. It rose 6 percent in 2008 as investors bought dollar assets, including Treasuries, as a haven from the global financial turmoil.
A collapse in the value of the dollar would jeopardize its status as the world’s reserve currency, Pimco said. If the dollar loses that “privilege,” U.S. companies may have to issue debt in foreign currencies and risk losing money as the dollar weakens, Clarida said. Currently, they profit when the U.S. currency falls.
The decline in the dollar’s value delivered a capital gain to U.S. investors of $443 billion in 2007, and more than $1 trillion between 2002 and 2007, as the relative value of their foreign investments rose, Clarida said. The rise of the dollar in 2008 lost U.S. investors $720 billion, he said.
http://www.bloomberg.com/apps/news?pid=20601083&sid=a83XY0Ek_Bvo
‘Disorderly Decline’ of Dollar Cannot Be Ruled Out
By Matthew Brown
Oct. 22 (Bloomberg) -- A “disorderly decline” of the dollar, leading to the end of its reserve-currency status, cannot be ruled out, Pacific Investment Management Co. said.
An orderly dollar decline is the “most likely scenario,” Richard Clarida, a Newport-Beach, California-based global strategic adviser at Pimco, wrote in a note to clients today. “A disorderly decline, while unlikely, cannot be ruled out.”
The Dollar Index, used by InterContinental Exchange Inc. to measure the U.S. currency against the euro, pound, yen, Swedish krona, Canadian dollar and Swiss franc, lost 7.4 percent this year and 35 percent since the beginning of 2002. It rose 6 percent in 2008 as investors bought dollar assets, including Treasuries, as a haven from the global financial turmoil.
A collapse in the value of the dollar would jeopardize its status as the world’s reserve currency, Pimco said. If the dollar loses that “privilege,” U.S. companies may have to issue debt in foreign currencies and risk losing money as the dollar weakens, Clarida said. Currently, they profit when the U.S. currency falls.
The decline in the dollar’s value delivered a capital gain to U.S. investors of $443 billion in 2007, and more than $1 trillion between 2002 and 2007, as the relative value of their foreign investments rose, Clarida said. The rise of the dollar in 2008 lost U.S. investors $720 billion, he said.
