Press briefing by Stephen Samuel Roach, senior fellow at Yale University and former Morgan Stanley Asia Chairman, on world economy and Sino-US economic relations, at the Royal Garden Hotel in East Tsim Sha Tsui.
Chen Xiaomei/South China Morning Post/Getty Images
  • Former Morgan Stanley Asia chairman Stephen Roach thinks the US dollar could plummet 35% against rival currencies due to Covid-19.
  • He told MarketWatch: "In a Covid era everything unfolds at warp speed."
  • Roach cited the huge fiscal and monetary stimulus pumped into the US economy in recent months as a driver for the currency's coming weakness.
  • "This massive shift to fiscal stimulus is going to blow out the national savings rates and the current-account deficit," he said.
  • For more stories go to www.BusinessInsider.co.za.

The dollar could slump as much as 35% against its rival peers and depreciate at "warp speed" as long as the pandemic still remains, former Morgan Stanley Asia chairman Stephen Roach warned in an interview with MarketWatch.

Roach, who is also an economist and senior fellow at Yale University, told MarketWatch during a Monday interview: "I do think it's something that happens sooner rather than later."

"In a Covid era everything unfolds at warp speed," he added, saying he expects the dollar to fall as much as 35% against its rivals.

Roach has been predicting a fall in the dollar for several weeks. He told CNBC's "Trading Nation" last week that the dollar will collapse thanks to a ballooning US deficit and deglobalisation.

A sinking national savings rate also stands to drag on the dollar, Roach said.

In his interview with MarketWatch, Roach highlighted the fact US unemployment has soared to around 49 million.

"This massive shift to fiscal stimulus is going to blow out the national savings rates and the current-account deficit," he told MarketWatch.

Roach was echoing points he made in an op-ed published by Bloomberg on June 14.

Roach said the current political landscape in the US, including mass protests against the treatment of Black citizens by police, are "hair-trigger responses" from people.

"We're at a critical point in the political cycle and the dollar is a relative price, so you're making a comparison to the United States and other countries and there are just really strong views against the analysts," that question US dominance, he said.

But Roach acknowledged that investors shouldn't necessarily be fearful of a dollar crash, adding that this wouldn't represent the first time the dollar has crashed.

Fear should only exist assuming investors "are unprepared and not hedged and have not thought about what some of the options are take advantage," he said.

He said investing in the euro could act as an alternative bet to investing in the dollar.

The dollar has been waning against key currencies in recent days. The ICE dollar index, which shows the dollar's strength versus six key currencies including the euro, has shed 2.9% in the last month, according to Markets Insider data.

Roach is not the only market voice predicting a fall in the dollar. Deutsche Bank warned on Monday that the US dollar will decline in the face of rising coronavirus cases in the US.

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