The Federal Reserve’s decision to embark on another round of quantitative easing (QE2 as it has been dubbed) puts the dollar at risk of a plunge, says Axel Merk, chairman of Merk Investments.
The Fed will buy $600 billion of Treasuries over the next seven months to jump-start the sluggish economy. Such purchases hurt the dollar by increasing supply of the currency.
The euro hit a nine-month high of $1.4282 Tuesday, and at 80.70 yen, the dollar isn’t far from its post-World War II low.
As for QE2, "It's with the best of intentions but I think it's a very, very wrong policy," Merk tells CNBC.
Inflation is on the way, he says. "One of the key things here is a weaker dollar has traditionally not been inflationary because Asian exporters like to absorb the higher cost of doing business," Merk explains. (more)
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