PIMCO bearish on the greenback

Via a Bloomberg report, a portfolio manager from PIMCO today made the remark that the dollar could lose value after the central bank has pumped a huge amount of money into the system.  Curtis Mewbourne said the dollar’s drop could be strongest against emerging market currencies.  This adds to the pressure which began when the Chinese government and Russian president Dimitry Medvedev suggested the use of a new global currency.

From the report:

“Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.

“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote.

Read more.

“Investors shoulconsider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.
“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote.

I believe that if the dollar were to lose value, it shouldn’t be by a lot.  It should only be in time that the Fed would begin pulling out the huge amount of money in the system, aka implement the exit strategy.  Because along with the prevention of inflation, keeping the value of the dollar is/should be another priority and when the exit strategies are already in place, its effects should be felt in both reduced inflation and steady value for the greenback.

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