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September 28, 2009

The US Dollar Is The New Peso

The U.S. dollar will continue weakening, and investors may borrow it to invest in higher-yielding assets, says Peter Schiff, president of Euro Pacific Capital.

“I don’t know when (the dollar) is going to strengthen,” Schiff told CNBC.

“The dollar isn’t the new yen, it’s unfortunately the new peso.”

A weak dollar and low U.S. interest rates push the greenback toward becoming a carry trade currency, which, like the yen for many years, attracts investors to borrow it cheaply to invest elsewhere.

However, Schiff says, the dollar will weaken even further as the yen becomes a stronger currency, which makes the U.S. dollar resemble a more volatile currency such as the peso.

“Not only can you borrow dollars for very cheap and earn to carry by investing in higher yielding assets, but the dollar is going to fall sharply. So anyone who puts on the carry trade is going to make a ton of money.”

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.
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