Buffett predicts dollar stumble

[Francisco Monjardino]

Buffett predicts dollar stumble

Famed investor reiterates belief that greenback is due for a downturn, blaming trade deficit.

March 20, 2006: 10:33 AM EST


NEW YORK (Reuters) - U.S. billionaire investor Warren Buffett Monday reiterated his long-standing prediction that the U.S. dollar would weaken over time.

"I think over time the dollar is going to weaken. I have no idea whether it will be this year or five years from now," he told reporters after ringing the opening bell at the New York Stock Exchange.

Warren Buffett

 

The dollar traded fairly steadily after Buffett's remarks.

"It's the consumer's action in the end that is doing it, but we have no governmental policy that counters the fact we are sending a couple of billion dollars a day abroad. We are trading -- we are buying goods and we are selling capital," he said.

The wide U.S. trade deficit was the main reason for the dollar's three-year decline through the end of 2004.

The dollar rallied in 2005 as the Federal Reserve raised interest rates, burnishing the appeal of dollar-denominated deposits to foreign investors.

But some currency analysts expect the record U.S. trade gap will push the U.S. currency once again into a sustained fall.

Buffett, who heads holding company Berkshire Hathaway Inc. (up $600.00 to $89,400.00, Research), has previously said he maintains a long-term bearish view on the dollar due to the size of the U.S. trade deficit.

Earlier this month, in his annual letter to Berkshire Hathaway Inc. shareholders, Buffett said he had reduced the company's stake in foreign currency contracts, a bet the U.S. dollar will fall, to $13.8 billion in nine currencies from $21.4 billion in 12 currencies a year earlier.

In that letter, he also cautioned stock investors to expect to earn "far less than they historically have," citing increased "frictional" costs that eat away at performance. These include costs related to trading, advice and money management. On Monday, he said that returns of 6 percent to 8 percent is reasonable to expect.

[Scubawarrior]

 Amigo francisco quero só expressar com humildade que discordo frontalmente com o timing da intervenção do buffet(claro). Mas também concordo no médio prazo que isso venha a acontecer pelas causas descritas e muitas outras.

  No curto prazo espero que os 1.13 venham a ser rápidamente atingidos, depois disso os 1.08 . dentro deste range espero nova inversão no cross e agora para novos máximos violentíssimos ( 1.60 / 1.80?).

   
abraço