Future weakness in the US dollar, says Natixis

February 15, 2019

HONG KONG - The French banking group, Natixis, is tipping major dollar weakness in the future. The fundamental cause of that projected weakness is that central banks are no longer financing the US external debt, it says.

The United States has a chronic external deficit due to its low savings rate, Natixis says, pointing out that, from 2002 to 2008, rapid US accumulation of external debt led to a steep depreciation of the dollar.

 "US foreign trade is currently deteriorating again due to the expansionary fiscal policy conducted at full employment.

"In addition, which is an aggravating factor, central banks have not financed the US external deficit since 2014 as foreign exchange reserves have been declining.

"The US external deficit is therefore becoming more difficult to finance, since private-sector capital must be attracted to the United States, which is likely to lead to major dollar weakness in the future."

www.natixis.com (ATI).