Templeton Asset Fund chairman Mark Mobius and Swiss Fund head Marc Faber agree that demand for U.S. dollars is untenably high.
"Everyone is rushing into U.S. Treasurys. They need U.S. dollars to do that, and have therefore sold everything in sight," says Templeton Asset Management head Mark Mobius.
"This is why emerging markets have gone down, why commodities have gone down,” Mobius told CNBC. “Everyone is moving into dollars."
Currency hedges were less effective than many expected because the dollar surprised many investors by becoming stronger instead of weaker, Mobius says.
As Treasury rates drop to 1 percent, Mobius expects investors will sell their dollars, weakening the currency significantly.
On a parallel track, Marc Faber considers asset markets "terribly oversold" because investors are going overboard into the U.S. dollar and Treasurys.
"What you could see in the next three months is a very strong rebound in asset markets, in equities, followed by a selloff in bonds and eventually a selloff in the dollar," Faber told CNBC.
"If we get a rebound in equities, it is conceivable that people will sell assets that held up well and try to put their money in distressed assets,” Faber says.
Faber says government interventions have increased market volatility and created deflation.
“We have colossal deflation in asset prices," Faber says, noting that equities alone have lost $30 trillion globally.
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