Exclusive outtakes from industry leaders
Hiroshi Watanabe, president of the Japan Bank for International Cooperation, saw his share of dollar buying intervention during decades at the nation’s finance ministry. But the market veteran says despite prevalent talk recently, a shift away from the greenback as the world’s reserve currency may be great in theory, but like the language of Esperanto short on daily practitioners.
“Esperanto is a very good language, but no community uses it in its daily life, ” Watanabe told the Reuters Japan Investment Summit.
“That’s the same situation that applies to the currency… I don’t see any other currency that can take the position to replace the key U.S. dollar.”
China, Russia and Brazil intend to push at this week’s Group of Eight summit for a new global reserve currency as an alternative to the dollar.
No country has been a bigger fan of the dollar over the years as Japan. You can see it in the country’s $1 trillion of foreign exchange reserves almost entirely concentrated in U.S. bonds or the sheer portfolio flows in the greenback month after month. But that may be changing. Yuuki Sakurai, head of financial planning and investment at Japan’s No. 9 life insurer Fukoku Mutual Life, said the dollar’s long role as the centre of the global currency universe may be coming to an end, partly due to politics. “Look at the U.S. position in the world community, that’s changing and that’s part of the story. I think Pax Americana, that regime is gone. But it’s not happening overnight, it’s changing gradually,” said Sakurai, whose oversees about $54 billion of assets, while speaking at the Reuters Japan Investment Summit. “If you think that a paradigm based on the dollar may be starting to change and that the euro’s weight globally may come close to matching the dollar’s presence, the dollar might fall to 80 yen in the future,” Sakurai said. “I am saying something a bit extreme, but the dollar might fall below 50 yen 10 years from now,” he said. The dollar is near 106.50 yen now, up from a 13-year low of 95.77 yen in March, but it is still not far from record lows against the euro.
”You know, I’ve lost more money in smaller positions and made more money in smaller positions in the last year than I have in 12 because of the spikes. Volatility has been unbelievable,” Firas Askari, head of foreign exchange trading at BMO Capital Markets, said at the Reuters Investment Outlook Summit.
With that in mind, ”If you know a trader, buy him a drink!” he said.