Charts Predict: Risk of 'Fully-Fledged Dollar Crisis'

The dollar is clearly stuck in a downward trend as it takes over from the yen as the carry-trade currency of choice, but if the trend continues it faces a “fully-fledged dollar crisis,” Robin Griffiths, technical strategist at Cazenove Capital, told CNBC.

“The dollar trade-weighted is clearly in a downtrend, it does have days when it rallies, but it’s basically persisting downwards and each potential support level breaks,” Griffiths said, while looking at a chart of the dollar index.

With US interest rates expected to stay near zero for some time, the greenback has now taken over from the yen’s 20-year reign as the main carry-trade currency, according to Griffiths.

“What that tells you is that many people wanting to invest anywhere go and borrow some dollars to do it with. Because they’re institutionalized in the opinion that -- by the time we pay this thing back it will be worth less,” he said.

“That’s extremely unhealthy and if this trend goes much further, like taking out the low of one-year ago … we’ll have a fully fledged dollar crisis and that will knock on across all markets,” he added.

Watch the video above to see Robin Griffiths chart the Australian dollar versus the greenback and Nymex natural gas.

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