Asian-based asset management firm, Sun Worldwide, believe that the fortunes of the US dollar, the world’s reserve currency, are poised to change significantly as the Federal Reserve continues to print money to buoy the US economy and banking system.
Sources close to Sun Worldwide pointed to resurgence in the euro, the yen and the pound against the dollar. The news comes as the FOMC (Federal Open Market Committee) prepares to make a decision on interest rates. Expectations are that the Fed will cut interest rates from the current 1% by 50 basis points to an unprecedented 0.50%.
Sun Worldwide reportedly expect Fed Chairman, Ben Bernanke, to outline a new policy of quantitative easing as he runs out of interest rate bullets with which to counter the specter of deflation now facing the world’s largest economy. Quantitative easing involves the central bank’s purchasing of US Treasuries with a view to taking on the debt that the Treasury department issues to pay for the bailouts and liquidity injections.
One of the unnamed Sun Worldwide sources said that the US was embarking on a course of monetary expansion the likes of which had not been seen for generations and that this would see the US dollar rapidly losing value against the world’s currencies.
