Dollar crash looms as US backs out of globalization

Stephen Roach, a faculty member at Yale University and former chairman of Morgan Stanley Asia, forecast a 35 percent plunge in the US dollar due to America walking away from globalization, as well as its massive budget deficit.

Roach warned in an interview with CNBC that a US dollar crash could spark a late 1970s-type stagflation crisis when prices rose sharply while economic growth was muted.

The greenback weakened while riskier currencies rallied on Tuesday as the US Federal Reserve prepared to start its corporate bond-buying scheme. The euro was close to US$1.15 (HK$8.97), this year's high.

This came after foreign investors sold around US$176.70 billion US Treasury bonds and notes in April, down from US$298.91 billion in March, data from the US Treasury Department showed.

Meanwhile, China's government bond futures plunged yesterday, pressured by market expectations of less liquidity as a special treasury bond issuance loomed. The mainland government will auction 100 billion yuan (HK$109 billion) of special treasury bonds on Thursday, kicking off a planned issuance of 1 trillion yuan to help fund recovery from the coronavirus pandemic, the finance ministry said.