The dollar is in danger of losing 20 percent of its value over the next few years if the Federal Reserve continues unconventional monetary easing, Bill Gross, the manager of the world's largest mutual fund, said on Monday.
"I think a 20 percent decline in the dollar is possible," Gross said, adding the pace of the currency's decline was also an important consideration for investors.
"When a central bank prints trillions of dollars of checks, which is not necessarily what (a second round of quantitative easing) will do in terms of the amount, but if it gets into that territory—that is a debasement of the dollar in terms of the supply of dollars on a global basis," Gross told Reuters in an interview at his PIMCO headquarters.
The Fed will probably begin a new round of monetary easing this week by announcing a plan to buy at least $500 billion of long-term securities, what investors and traders refer to as QE II, according to a Reuters poll of primary dealers.
"QEII not only produces more dollars but it also lowers the yield that investors earn on them and makes foreigners, which is the key link to the currencies, it makes foreigners less willing to hold dollars in current form or at current prices," Gross added. (more)
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