Traders are warning of a dramatic change in dollar selling. They fear central banks from the Middle East may force their Asian rivals to more aggressively drive the dollar down.
In 10 months, the Dollar Index has lost 14% because the world keeps accumulating dollars it doesn’t want and sells them. Asian central banks are key.
Many Asian central banks have been forced into waging wars to keep their currencies from appreciating because of the influx of investors to emerging markets. They sell waves of their own currencies into the market in an attempt to keep exports competitive.
In return they often receive dollars. But with the Federal Reserve printing dollars and the greenback’s value continually falling, the Asians sell those dollars in order to preserve the value of their reserves.
“Asia Pacific banks are renowned for their strict diversification” says Neil Mellor at BNY Mellon. “They hold a level with China in order to be competitive. Beyond that it’s very strict ratios. They need to swap-out of dollars.”
Join us on our
Share this page with your friends
on your favorite social network: