The U.S. dollar could weaken by as much as 15% by mid-2024, says Stephen Jen, CEO of research firm Eurizon SLJ Capital. Jen expects inflation to drop below 4% by the end of the year and only sees rate cuts on the horizon. If this is the case, the dollar “is vulnerable to substantial (10–15%) depreciation” over the next 18 months. “As the USD loses cyclical support, the US’ familiar structural flaws might again become exposed, as the supportive ‘tide’ recedes,” Jen warned. Recently, China and Brazil made a deal to reduce their dependence on the U.S. dollar and favor their own currencies in trade transactions. Malaysia is following suit in an effort to ditch the dollar, and conversations with China about an Asian Monetary Fund are now taking place. “There is no reason for Malaysia to continue depending on the dollar,” said Malaysian Prime Minister Anwar Ibrahim on Tuesday.

Business Insider/Phil Rosen
The US dollar could weaken another 15% over the next 18 months as cooling inflation prompts the Fed to cut rates, research firm says

The US dollar could weaken by as much as 15% in the coming four-to-six quarters as inflation continues to subside and the Federal Reserve loosens monetary policy, according to a Tuesday research note by Stephen Jen at Eurizon SLJ Capital.

For February, inflation as measured by the consumer price index cooled in line with expectations, rising 6.0% year-over-year. That data arrived ahead of the Fed’s 25 basis-point rate hike in March amid the turmoil of the Silicon Valley Bank crisis.

Inflation notched a high for the cycle in June 2022, with CPI clocking in at 9.1% year-over-year — the highest rate since November 1981. By the fourth quarter of this year, Jen anticipates that reading to drop to below 4%.

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Fox Business/Louis Casiano
China, Malaysia to discuss Asian Monetary Fund to reduce dependence on US dollar

Malaysia is reviving a decades-old proposal to create an Asian Monetary Fund to reduce dependence on the U.S. dollar, with China being open to talks about the matter.

Malaysian Prime Minister Anwar Ibrahim proposed the fund last week, Bloomberg reported.

“When I had a meeting with President Xi Jinping, he immediately said, ‘I refer to Anwar’s proposal on the Asian Monetary Fund’, and he welcomed discussions,” Anwar, who also serves as the country’s finance minister, told the Malaysian parliament on Tuesday.

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ZeroHedge/Charles Hugh Smith
Why Interest Rates Are Not Going Back To Zero

In a system maintained by ever-greater extremes, confidence erodes very quickly once the next extreme fails to move the needle.

Many observers expect interest rates to fall back to zero as inflation dissipates and central banks rush to stimulate flagging economies. This expectation is reasonable based on the events of the past 15 years (2008-2023), but if we zoom out to a 50-year timeline, we get a different perspective and draw a different conclusion.

2023 is not 2008, and the difference can be summed up in one phrase: global risk has been repriced. Interest rates reflect not just inflation expectations and central bank stimulus; interest rates and bond yields also reflect the risk premium on the cost of credit-money, and if the risk profile has changed in fundamental ways, the risk premium and cost of credit-money will reflect that, regardless of inflation and central bank stimulus.

You can read the full article, here.

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