“The Frightening Collapse Has Begun” Giant Names: Gold and Check Out!

Money managers recommend selling the dollar and investing in assets such as emerging market stocks and gold as the world’s economic recovery gathers momentum. A growing chorus of investors are betting that positioning in the world reserve currency dollar has peaked with a dramatic comeback from a month ago when it was the most bullish since 2015. Opinions and predictions of world-renowned executives cryptocoin.com compiled for our readers.

Peter Boockvar prefers gold and silver as alternatives to dollars

K2 Asset Management recommends selling the dollar for Asian emerging bonds and European equities. Brandywine Global Investment Management, on the other hand, buys commodity-linked currencies. Bleakley Advisory Group LLC prefers gold and silver. Jack McIntyre, the money manager who shorted Brandywine against the Australian and Chilean peso last month, comments:

The dollar has peaked. Overvalued, it stayed on people too long. In my opinion, the biggest factor that will weaken the dollar will only be the recovery of global growth.

The Bloomberg Dollar Spot Index fell 0.6% on Wednesday, its biggest drop since May, as traders sold the U.S. currency after inflation data, which was generally in line with market forecasts. As increased growth from Germany to China added to the value outside the world’s largest economy, losses were exacerbated as funds unraveled their long positions trying to front a hawkish Federal Reserve. On the matter, Peter Boockvar, chief investment officer at Bleakley Advisory Group in New Jersey, said:

The dollar has clearly tumbled and, in retrospect, it really only rallied last year as the Fed was ahead of the Bank of Japan and the European Central Bank in tightening. In this environment, I still love gold and silver as alternatives to the dollar.

George Boubouras: Dollar peak is definitely behind us

Investors say the dollar will likely continue to weaken as the hypothesis of a wider US deficit and a broader global recovery underpinning non-US assets begins to take effect. At K2 Asset Management’s office on Collins Street in Melbourne, George Boubouras is looking for opportunities to buy everything from Chilean pesos to government bonds in Southeast Asia. George Boubouras, head of research for the fund manager, comments:

The dollar’s top is definitely behind us. Currency traders are really taking the Fed’s hikes and economic recovery into account now. From emerging markets to Europe, there are plenty of opportunities among government bonds, loans and equities, with the belief that the dollar may weaken further.

The Barings Investment Institute is just one of the firms to see the dollar weaken against emerging market peers. Christopher Smart, chief global strategist and chairman of Barings Investment in Boston, states:

While markets are looking at current risks, from Omicron to a much more manageable pandemic this year, the dollar’s slump represents a natural part of the global recovery. As economic activity normalizes, there may be more capital flows to other parts of the world. Emerging market currencies may finally benefit from the recovery.

Are the dollar bulls or the bears right?

While the dollar bears are finding their voice, others say it’s too early to wipe out the dollar yet. Ilya Spivak, Chairman of DailyFX Asia Majors, says the recent decline in the US currency did not come as a hawkish surprise in Wednesday’s inflation numbers, reflecting investor relief in a recent speech from Fed Chairman Jerome Powell:

I don’t think it ever peaked. The dollar remains constructive for the rest of this year, but of course the markets are not moving in a straight line.

Hedge funds also continue to rise and have even increased their total long positions on the dollar against a basket of eight other major currencies in the past three weeks, according to data from the Commodity Futures Trading Commission compiled by Bloomberg. Citigroup Global Markets Inc. points to both rising US interest rates and the Fed’s quantitative tightening for emerging market rates and currencies. In a note, Citigroup strategists, including Dirk Willer, highlight:

The reason EMFX has yet to react to higher US interest rates is largely because the spreads of Treasury bills versus bonds are mostly stable. We are still long on the dollar, but more in the relative value area before the last increase in US real interest rates.

Others expect more dollar losses and are looking for alternatives. Rob Mumford, investment manager at GAM Hong Kong Ltd, explains:

Dollar fundamentals are weak due to low real interest rates and large external negative balances. In an environment of higher inflation and higher developed world interest rates, EM (emerging markets) is a good place to be.

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