CNBC: A Dollar Crash is Virtually Inevitable, Asia Expert Stephen Roach Warns

June 16, 2020

Article by Stephanie Landsman in CNBC financial

The stronger dollar era may be on borrowed time.

Stephen Roach, one of the world’s leading authorities on Asia, is worried a changing global landscape paired with a massive U.S. budget deficit will spark a dollar crash.

“The U.S. economy has been afflicted with some significant macro imbalances for a long time, namely a very low domestic savings rate and a chronic current account deficit,” the former Morgan Stanley Asia chairman told CNBC’s “Trading Nation” on Monday. “The dollar is going to fall very, very sharply.”

His forecast calls for a 35% drop against other major currencies.

“These problems are going from bad to worse as we blow out the fiscal deficit in the years ahead,” said Roach, a Yale University senior fellow.

The U.S. Dollar Currency Index is up more than one percent over the past two weeks and is relatively flat so far this year. But Roach believes it’s no time to get complacent.

The big question: Will it happen quickly or gradually?

His timeline is rough — over the next year or two, maybe more. However, Roach suggests a crash virtually inevitable, and it’s a risk investors shouldn’t ignore.

“Generally, it’s a negative implication for U.S. financial assets,” he added. “It points to the probability of higher inflation as ...

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