Monday, June 5, 2017

BIS - Watch out for Scarcity of Dollars Outside the US

The Bank for International Settlements has issued a warning that upcoming events could lead to a drying up of US dollars around the world. The warning appears in this article in which is actually talking about the world economy perhaps being on the rebound. Below are the paragraphs with the BIS warning.


US dollar shortage?

"Also, watch out for the risk of a scarcity in US dollar outside the United States, warns the Bank for International Settlements (BIS). This arises when the Fed opens its door to further unwinding its multi-trillion quantitative easing stimulus programme (having built-up a US$4.5 trillion balance sheet).

Once the Fed slows down its purchases of securities, US dollars pumped and released around the world will start to disappear. US dollar could also be drawn back to the US under any tax amnesty to repatriate profits held overseas. Already, money market rates suggest greenbacks are getting scarce. Non-US investors are already paying a premium to swap their funds into US dollar via cross-currency basis swaps.

The US dollar has been riding high, even towards parity at one time, with the euro beset by populist threats. But terms of the US dollar-euro equation are shifting on both sides of the Atlantic. There is political turbulence emanating from the White House since May."


1 comment:

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