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How Low Can the Dollar Go? Just Wait

Monday, 7 Mar 2011 | 4:45 PM ET
Dollar and Yen
Dollar and Yen

Think the dollar's fallen too far? Think again.

That was the unappetizing message I got over lunch with David Skarica, author of "THE GREAT SUPER CYCLE: Profit from the Coming Inflation Tidal Wave and Dollar Devaluation." Skarica says the U.S. government is printing too much money for its quantitative easing program, and once that ends, there will not be enough buyers for all that U.S. currency. In addition, China will eventually become less dependent on exporting to the U.S. market in exchange for dollar-based payments. Too much supply of dollars, not enough demand, and .... you get the picture. Skarica thinks the dollar index over an extended period could fall as low as 60, from roughly 76.5 now.

What does Skarica like instead? He told me he thinks the yen may eventually turn out to be a good buy. The Japanese currency could lose significant value as traders unwind carry trades that bank on Japan's yields being higher than those elsewhere. But Japanese consumers have very little debt, Skarica pointed out, and a majority of companies on the Nikkei have no debt. That means that they'd be interested and able to invest on any reasonably sign of renewed economic growth.

These trends won't unfold overnight, or even over the near term. But for long-term investors, they're worth keeping in mind.

CURRENCY FUTURES

Tune In: Beginning March 11th, CNBC's "Money in Motion Currency Trading" will air on Fridays at 5:30pm.

"Money in Motion Currency Trading" will repeat on Saturdays at 7pm.

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