Advertisement

Gauging the chances of a collapse in the US dollar

Reading Time:4 minutes
Why you can trust SCMP
Tom Holland

Yesterday, one of my colleagues at the South China Morning Post asked me if he should switch his savings out of Hong Kong dollars.

He had heard a lot of talk about a coming collapse in the US dollar and was worried that if the US currency did collapse, it would drag the Hong Kong dollar down with it, thanks to our exchange rate peg.

Did I think the US dollar really would crash, he asked, and if so, what currencies should he shift his money into? How about the euro?

Advertisement

Offering financial advice to co-workers is a dangerous business, even if they do ask for it. If you turn out to be wrong - and, let's face it, there's a pretty high chance you will be - at best, you risk exposing yourself to public ridicule in the workplace. At worst, you earn the undying enmity of one of your colleagues.

On the other hand, a refusal to answer can cause offence. And the question is an important one, affecting everyone who has an income or savings denominated in Hong Kong dollars. So here goes:

Advertisement

At first glance, it certainly looks as if the US dollar is in trouble. The first chart below shows the greenback's performance against a basket of six major currencies. As you can see, the dollar has been on a downward trend for almost eight years, weakening 37.5 per cent since early 2002.

Advertisement
Select Voice
Choose your listening speed
Get through articles 2x faster
1.25x
250 WPM
Slow
Average
Fast
1.25x