With the deeply depressed U.S domestic savings now facing intense downward pressure there are serious doubts around the world as to whether the dollar should be the world’s primary reserve currency still – that is according to bloomberg’s report ‘A Crash in the Dollar Is Coming.’
We asked Gervais Williams, Head of Equities at Premier Miton Investors what implications this has on money markets around the world?
“A weak US Dollar implies that US portfolio managers are scaling up their portfolio allocations overseas. This can be particularly upbeat for some of the Emerging Economies, as even relatively small portfolio allocations can have boost the returns on some of these exchanges. Alongside, since most commodity prices are set in dollars, it is usual for their prices to increase when the US dollar is weak as well. Overall, asset markets tend perform better at time of US Dollar weakness”
Talking about China who are set to launch a digital version of its Yuan and potentially forcing the U.S to digitise the dollar to compete, would the problem compounded. Gervais Williams continues,
“There are numerous factors that affect the level of exchange rates. In my view, I don’t think that the digitisation of the Yuan or indeed other currencies in itself is that significant in comparison to all the other factors that drive the levels of various exchange rates.”
With Boris Johnson confirming only a partial easing of the lockdown in England from next Monday due to progress in combating the virus ‘moving slower’ than had been hoped for, is this something UK companies should be concerned with right now?
“At present the UK government’s priority is to support the UK economy so it can continue to sustain plentiful employment in a way that ultimately meets our climate change goals over the coming years. The recent stock market recovery is helpful for quoted companies, as it will give them a good opportunity to raise additional risk capital if necessary.”
Gervais Williams is Head of Equities at Premier Miton Investors. Gervais manages the LF Miton UK Multi Cap Income Fund, LF Miton UK Smaller Companies Fund, Miton UK MicroCap Trust plc and The Diverse Income Trust plc.
Premier Miton was formed in November 2019 from the merger of Premier Asset Management Group plc and Miton Group plc. The merger brought together the capabilities, expertise and knowledge of two highly regarded companies to create a new organisation that is even better placed to deliver the right outcomes for its clients.