Tags: Peter Warburton | Federal Reserve | tapering | dollar

Peter Warburton to Moneynews: Fed Tapering Won't Be Enough to Boost Dollar

By    |   Friday, 20 December 2013 04:17 PM

While some financial experts say the Federal Reserve's decision Wednesday to taper its bond buying will provide a sustained lift for the dollar, Peter Warburton, director of U.K.-based Economic Perspectives, an economic consulting firm, doesn't agree.

"The way that a lot of people read it is that what the taper will do is reinforce the upward track of U.S. Treasury yields, and that could give further support to the dollar," he told Newsmax TV in an exclusive interview.

The other way people see a tapering supporting the dollar is by pushing investments out of emerging markets, particularly bond funds there, Warburton says.

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"I'm not so sure about whether [all] that's going to be the deciding mechanism, so I'm a bit more skeptical, and the dollar outlook is more neutral."

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The greenback has slumped since the summer, he notes. "So there is certainly quite a bit of doubt," Warburton said. He sees sterling staying in a range of $1.60-$1.65, and he thinks the yuan will continue to appreciate at a 2 percent to 3 percent annual pace against the dollar.

Meanwhile, the U.S. currency soared to a five-year high of 104.64 yen Friday. Warburton sees 110 as the limit there. "That's more a yen story than a dollar story," he said.

In Europe, the financial crisis remains lurking under the surface, Warburton says. It has been largely ignored as Germany has put together a coalition government following its September elections.

"It's as though Germany . . . hasn't wanted to confront the issues in places like Spain and Portugal," he said.

"What it has done, really, is to give a kind of much longer stay of execution for places like Greece. The latest figures out of Greece were terrible. Economic growth was down about minus 2-3 percent. Prices are falling."

The country currently can't meet the requirements for its rescue package, Warburton says. "They definitely need an extended rescue package. So the issues haven't gone away."

The recent period of stability will end soon, he says. The fly in the ointment is the European Central Bank's Asset Quality Review of the continent's banks.

"That will use year-end values from balance sheets. It probably won't start to hit the headlines until after April, but it will contain all kinds of very worrying news about the conditions of bank balance sheets," Warburton said.

That will include banks in France and Germany as well as Spain, Italy and Portugal, he says. "So these fundamental issues have just been set to one side for a number of months."

Meanwhile, "the ECB is coming under increasing pressure to provide some more stimulus to try heading off another round of crisis" in the eurozone's weak economies, Warburton said.

Editor’s Note: Obama Donor Banned This Message (Shocking)

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While some financial experts say the Federal Reserve's decision Wednesday to taper its bond buying will provide a sustained lift for the dollar, Peter Warburton, director of U.K.-based Economic Perspectives, an economic consulting firm, doesn't agree.
Peter Warburton,Federal Reserve,tapering,dollar
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2013-17-20
Friday, 20 December 2013 04:17 PM
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