The dollar, which is flirting with multi-year lows, will likely drop further, and that’s a good thing, says Scott Mather, head of global portfolio management for Pimco.
As long as the decline is gradual, it can help the U.S. economy by lifting exports, he wrote on the firm’s web site.
“More U.S. dollar weakness should be expected but not necessarily feared,” Mather maintains.
“Contrary to many proclamations from official and private sources, a ‘strong’ dollar is not necessarily in the U.S. or collective global economic interest.”
Some say the Federal Reserve should raise interest rates and that central banks should intervene in the currency market to buoy the greenback.
But Mather argues, “Attempts to prevent a continued orderly dollar decline may further perpetuate global imbalances, slow U.S. economic recovery and prevent a stabilization in the U.S. debt dynamic that is badly needed.”
He doesn’t see the dollar’s status as the world’s primary reserve currency at risk and doesn’t see the currency’s depreciation causing hyperinflation.
In other Pimco related news, Bloomberg reports that Pimco Total Return fund may soon become the largest mutual fund in history.
The fund, run by the legendary Bill Gross, is benefiting as investors flee stocks for bonds.
If the current pace of inflow continues, Pimco Total Return could surpass the record this month.
The high is $202.3 billion set by Growth Fund of America in 2007, according to Morningstar.
Total Return managed $199 billion as of Nov. 30.
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