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Analysts predict U.S. government to devalue dollar

26 November 2008 09:46 (UTC +04:00)

â€œThey think that if you drive down the value of your money, it makes you more competitive, now that has never worked in history in the long term,â€™â€™ said Rogers, Bloomberg reported.
According to Rogers he predicted the dollar would rally in the third and fourth quarters of 2008 in an interview on April 27, 2008. Since June 30 the dollar has gained against the 16 most traded currencies. The only exception is the yen, and investors ran for the safety of the Treasuries after the global financial crisis hit the world and pushing everyone in a recession. American politicians are trying to reverse those gains in hopes of being able to revive economic growth.
Rogers stated that the dollar was going to â€˜lose its status as the worldâ€™s reserve currencyâ€™. He continued by stating, â€œIt will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency.â€ His statement was made during an interview with Bloomberg Television. Rogerâ€™s and his company is currently buying yen and stated that of all the sixteen most active currencies that have weakened against the yen in 2008, South Koreaâ€™s currency has fallen 45 percent, the worst performer of the year.
Rogers continued to comment on the dollarâ€™s rally by noting that it has lasted numerous months already and that it â€œwill probably go into next year. What I plan to do sometime during this rally is to get out of the rest of my U.S. dollars. If I were doing it today and what I have done today is buy the yen,â€ Rogers said. â€œBut, it is also an artificial move thatâ€™s going on. Itâ€™s a difficult problem to find out what is a sound currency.â€
Rogers, whose company is also purchasing commodities, stated that â€œfundamentals have not been impaired and, in fact, are improved. In mid-October, I started buying commodities, I started buying China and I started buying Taiwan,â€ he said. â€œI bought them all, but Iâ€™ve been focusing more on agriculture. I mean sugar is 80 percent below its all-time high. Itâ€™s astonishing how low some of these prices are.â€
Analysts confirmed that the U.S. will devalue its currency to strengthen the economic competitiveness however the dollar will keep rising by early 2009. And then, there will be reverse trend because of inflation to be fuelled by funding pumping as part of economic stimulus package in the United States.
Given that the Federal Reserve set its benchmark interest rate at 1 percent in an effort to avert the worst U.S. economic downturn in the postwar era, a surge in absolute money supply and ultimately in inflation is inevitable. Nevertheless, soft monetary policy will prevail because a decline in production and a rise in unemployment are more dangerous in the face of economic crisis.