Rising rate cut bets have proved negative for the U.S. dollar, with an index measuring the performance of the greenback against a basket of major global currencies having weakened in recent sessions. Economist and gold bull Peter Schiff on Thursday weighed in on the development.
What Happened: The U.S. dollar index fell to an intraday low of $100.92 on Tuesday, the first time the index fell below $101 this year. Despite the index trading at its lowest level since late-Dec. 2023, it is still relatively high, said Schiff in a post on X, formerly Twitter.
The economist flagged the possibility of further weakness ahead. “It looks like it’s on the verge of a total collapse. When that happens you’re gonna see some serious s**t,” he said.
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2 Pieces Of Advice To Harris: In a separate post, Schiff had a piece of advice for Democratic presidential candidate Kamala Harris. Taking a potshot at Harris’ proposed policies against price gouging, he said the government doesn’t make things more affordable and on the contrary, it makes them expensive.
“If Kamala wants lower prices, she must get the government out of the way so the free market can provide them,” he said.
Schiff also called upon Harris to balance the budget by implementing spending cuts. This can stop the Federal Reserve from printing money to bridge the budgetary gap and curb inflationary pressure.
Why It’s Important: The dollar is likely to remain under pressure in the coming months as the Fed sets out to reverse its aggressive rate hikes implemented since March 2022. The possibility that the dollar is poised for the next secular bear market is worth considering, said Morgan Stanley Chief Investment Officer Lisa Shalett in a note in March. She premised the expectation on the following:
- Appreciation in the value of most commodities, which are denominated in the dollar
- rising tensions between the U.S. and China, which will drive the latter to reduce its reliance on the dollar, which in turn will drive down the currency’s demand
- The Bank of Japan’s move away from its ultra-loose monetary policy
In the eventuality of the dollar going on a secular decline, the strategist recommended investors that increase their exposure to real assets such as commodities, gold, and energy as well as power-related infrastructure and real estate investment trusts. She also recommended investing in international stocks, especially those in Japan, India, Mexico and Brazil.
The Invesco DB US Dollar Index Bullish Fund UUP edged up 0.11% to $28.10 in premarket trading on Thursday, according to Benzinga Pro data.
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