Video: Dollar dominance and the dance of global economies: What lies ahead? | Forexlive

I spoke with Kitco News about the decline of the US dollar and the rise of de-dollarization, which has been a topic of conversation for years and has returned again. The weaponization of the dollar during the Ukraine war has accelerated this process. International trade is now being conducted in Chinese Yuan, and oil and natural gas are being sold in Russian Rubles or traded for gold.

However, the U.S. dollar still remains the dominant means of payment, and gold and oil, the most important commodities in the world, are still priced in USD.

I note that despite the rhetoric suggesting a larger decline, the U.S. dollar index is only down around 1.5%. The conversation aims to unpack the implications of a declining dollar and provides guidance.

We also discuss the pricing of commodities like gold, which is still primarily done in US dollars. Investors are encouraged to consider gold and other assets in different currencies to better understand the real story behind market performance. The discussion highlights that there aren’t many outright winners in the current environment, as everyone moved in lockstep during the pandemic and is now gradually recovering. The focus is on finding profitable trades and looking for long-lasting opportunities rather than trying to time the market perfectly.

I discussed the value of money and the reasons for the US dollar’s strength last year, attributing it to the Federal Reserve’s aggressive rate hike compared to other countries.

Looking ahead, mortgage rate exposure in countries like Australia, the UK, and Canada is predicted to cause pain and lead to rate cutting cycles, which will impact their currencies.

I also highlight Japan’s situation, with low inflation and a new central bank governor. I predict that Japan will eventually hike rates, but there is a risk that it could cause a problem in the highly indebted country. This could lead to a global route, with yen-denominated debt causing investors to seek safe havens like the US dollar or gold.

Regarding the Federal Reserve, I expect the Fed to maintain higher rates for longer to avoid causing another inflation problem. I believe that the Fed might be able to walk the line between a shallow recession and getting inflation under control, but there are risks towards growth. Inflation is no longer the main concern, and the focus shifts to growth data and the type of recession that may occur. I also mention pent-up savings as a factor to watch, as it could lead to a tough Q4 in 2023 if the Fed remains stubbornly high and those savings run out.

Have a watch.