The spiraling US dollar is more a case of dollar overvalued and the probability of USD turning into a bubble is quite high, warned legendary investor Jim Rogers.
The leading investor said in a TV interview: “The dollar is going to get overpriced and the dollar might even turn into a bubble, depending on how bad the turmoil is.”
This dollar bubble will puncture as investors start seeking safer havens. When there is panic, people look for a safe haven and that makes dollar overvalued, Rogers added.
According to Business Insider, Rogers equated the rising dollar value to the trend of people seeking safe havens for assets. But he said, “dollar’s value strong and will continue to be strong because everybody’s panicked about the world.”
US Dollar No Safe Haven
Affirming his theory of dollar overvalued, Rogers said he does not consider the US dollar as a safe haven. “It’s not. It is certainly not,” he added.
Noting that he himself has big exposure to the greenback, Rogers said this is because investors have nowhere else to go.
He added: “I own a lot of US dollars, though. Not because it’s a safe haven, but because people think it’s a safe haven. And when the world falls apart, people will put their money into the dollar.”
The top investor said as the dollar goes up a lot of currencies will go down, including the Chinese currency, European currency, and the British currency.
Slump in Asian Markets
Meanwhile, Reuters reported a slide in Asian share markets on Monday as the US dollar turned stronger after US Federal Reserve Chair Janet Yellen’s hints that interest rate hike is on the cards.
Barring Japan, MSCI’s broadest index of Asia-Pacific shares slid 0.7 per cent. But Japan’s Nikkei climbed 2.2 percent as the yen went weak against the dollar.
Rate hike brightened in the US as job creation increased and economic growth continued to expand at a tepid pace.
Yellen’s Friday speech at the Fed’s annual monetary policy conference in Jackson Hole was backed up by the Fed’s No. 2 policymaker, Vice Chair Stanley Fischer statement that the case for a hike in 2016 has been reinforced.
In a slight disagreement with the dollar overvalued theory, Shane Oliver, head of investment strategy at AMP Capital in Sydney, wrote: “While the move towards another Fed rate hike will likely cause bouts of consternation in investment markets I don’t see the same degree of uncertainty that we saw around last year’s Fed rate hike.”
Read Also: The US Rate Hike Imminent
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