Weak dollar could hurt U.S. assets -PIMCO's Gross
Tuesday August 21, 4:55 pm Eastern Time
NEW YORK, Aug 21 (Reuters) - The weakening U.S. currency could trigger outflows of foreign investment in dollar-denominated assets like stocks and corporate bonds, the manager of the world's largest private bond fund said Tuesday, in remarks broadcast by CNBC Television.
While a weaker dollar could give ailing U.S. manufacturers a boost by making their products cheaper for foreign customers, massive flows of funds into the United States during the past several years risk reversing if the dollar extends a six-week-long slide against other major currencies.
``The real negative comes in the short term as foreign institutions and foreign investors begin to liquidate U.S. stocks and U.S. bonds based upon this weaker dollar,'' said Bill Gross, managing director of Pacific Investment Management Co. in Newport Beach, Calif, which manages over $220 billion.
``Even U.S. Treasury bonds, long Treasury bonds, are at risk as foreign institutions begin to sell,'' said Gross, who was speaking on CNBC Television.
Since hitting 15-year peaks on a trade-weighted basis in July, the dollar has fallen about 7 percent in just six weeks as fears the current U.S. economy slowdown would extend well into the future despite aggressive Federal Reserve rate cuts.
The dollar fell on Tuesday alongside a U.S. stock market sell-off that brought the major indexes to lows not seen since April. The selling came after the Fed slashed interest rates for a seventh time this year, bringing benchmark borrowing costs to 3.50 percent, their lowest since early 1994 |
