The U.S. Dollar is the New Peso Not the New Yen Says Peter Schiff

In a recent converversation about the collapse of the U.S. dollar, Peter Schiff stated that the Federal Reserve is facing a dilemna that they'll have to make a decisions about, neither one which looks like it'll end in a good way for the U.S. dollar.

The first one is to continue on with close to zero interest rates where inexpensive dollars are the endless supply for carry traders, or they could stop the carry trade in its tracks by raising interest rates, which would cause a deeper recession "than anything we’ve experienced so far.”

Schiff added that the use of the yen for carry trade is now over, and it should continue strengthening, as the Japanese consider it a good move for their domestic economy for it to strengthen rather than be weak with low interest rates connected to it any longer.

When asked about the future of the U.S. dollar and carry trade, Schiff responed in a CNBC interview, “I don’t know when [the dollar] is going to strengthen. The dollar isn’t the new yen, it’s unfortunately the new peso.

Either way, as far as making money on the carry trade, Schiff said that because the U.S. dollar will continue to collapse, those using it to invest in higher yielding currencies and assets should make a fortune for some time to come.

Dollar Gains Against Major Latin Currencies

The U.S. dollar enjoyed gains against major Latin American currencies today, against the backdrop the Federal Reserve was going to keep interest rates where they're at, with no plan on raising them any time soon.

Today's gains were against the Chilean peso, Peruvian Sol, Brazilian real, Mexican Peso and Colombian peso.

With the Chilean peso, the dollar increased as high as a two-month high of 515.13, although falling back close to the end of the session.

Against the Peruvian sol, the greenback rose to a two-week high of 2.8350, in contrast to the 2.7725 close on Monday.

The dollar advanced for an 8-day high against the Brazilian real, quickly jumping to 1.5775 at about 9:00 am EST.

With the Mexican peso it also got off to a quick start in the morning, as it grew from its poor performance yesterday of 8.8568; a multi-year low. It increased to 9.9377 early in the morning, and held fairly strongly at the end of the session.

U.S. Dollar Mixed Against Latin American Currencies

The U.S. dollar was mixed against its Latin American counterparts, as it fell to a multi-year low against the Mexican peso, while also falling against the Colombian and Chilean pesos on Friday.

Against the Brazilian real the U.S. dollar increased from multi-year lows, while it also gained against the Peruvian Sol.

Citing inflation concerns over food and commodity prices, the Mexican central bank held interest rates where they were, as inflation was higher than expected in the early months of 2008. The dollar ended the session at 10.4706, after falling to a low of 10.4348.

After falling to muli-year lows earlier in the session, the dollar gained some back against the Brazilian real, reaching a high of 1.6730.

At about mid day, the dollar fell to a low of 454.75 against the Chilean peso, in contrast to the high of 459.65 it reached on Thursday.

Against the Peruvian Sol the dollar went as high as 2.7235, after reaching 2.7175 the day before.

The Columbian peso gained against the U.S. dollar, as it went to 1786.00 on Friday, after weakening at 1794.50 earlier in the day.