I have been warning for sometime that there will be a currency crisis most likely later this year where confidence in the U.S. dollar is lost. Quantatative easing (money printing) coupled with huge budget deficits will result in the dollar collapsing especially against gold. We are begining to see the start of the decline. The result will be massive inflation and shortages of basic supplies as inflation expectations lead people to begin to hoard items that they fear will be more expensive in the future. Commodity prices have been on a tear lately as dollars begin to flow toward all things tangible. Oil prices are at $62 a barrel almost double what they were just a few months ago. Gold looks like it wants to go over $1,000/ounce, this time for good.-Lou
Day of reckoning looms for the U.S. dollar
The U.S. dollar's day of reckoning may be inching closer as its status as a safe-haven currency fades with every uptick in stocks and commodities and its potential risks - debt and inflation - are brought under a harsher spotlight.
Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a "serious case of dollar damage" was underway.
"We long warned about the day of reckoning for the dollar emerging at the next economic recovery," Mr. Laidi said in a note.
Mr. Laidi said economic recovery would weigh on the greenback as real demand for commodities, coupled with improved risk appetite, caused investors to seek higher yields in emerging markets and commodity currencies. This would draw investment away from the U.S. dollar, which was dragged down by growing debt and the risk quantitative easing would eventually spark a surge in inflation.
The U.S. dollar slid against most major currencies Wednesday, hitting a five-month low of US$1.3775 against the euro and pushing the Canadian dollar up US1.21¢ to a seven-month high of US87.69¢.
John Curran, the senior corporate dealer at Canadian Forex, said the U.S. dollar would likely fall further in the next week, with the Canadian dollar likely reaching about US88.35¢, at which point it could break higher to test the US92.35¢ level.
"The U.S. dollar is continuing to slide as investor appetite is gaining momentum," Mr. Curran said. "People are getting comfortable about taking on a little more risk."
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