Dollar Index Slides to Lowest in 14 Months

The Dollar Index has fallen to its lowest level since August 2008, dropping to 75.767. The Dollar Index measures the U.S. dollar against the Canadian dollar, Swedish krona, Swiss franc, yen, pound and euro.

Low interest rates and U.S. dollar value have investors treating the greenback as a carry trade, and are selling of their dollars in order to get better returns on higher-yielding currencies.

While the U.S. asserts they want a strong dollar, their practices contradict that assertion, and foreign countries are concerned over their own manufacturing bases which are dependent on a stronger dollar to sell goods in the U.S. at a decent profit.

Of course U.S. manufacturers would like a weak dollar to continue, as that would help prop up the industry; strengthening it and eventually creating more jobs, while also shrinking trade deficits.

Jim Rogers: Inflation Going Higher

U.S. Dollar Inflation

In a recent interview, Jim Rogers said that the U.S. government is lying about inflation, and that the current rate is probably more around six to seven percent, in contrast to what is being asserted.

Rogers simply points to the obvious, that when you go out shopping, the prices are definitely higher, and obviously that can't be spun by the government.

The best play going forward, according to Jim Rogers is to invest in gold and commodities, as raw materials will outperform other assets in the future.

U.S. Dollar Inflation

Peter Schiff: Carry Trade Dollar

Peter Schiff has been making the rounds lately and talking about the continuing collapse of the U.S. dollar, which will make it an ideal carry trade candidate going forward, and which will make many people very wealthy as a result.

Schiff has also said that he has no idea when, or even if, the U.S. dollar will strengthen any time soon. Of course that can't be counted on at all with the ongoing spending spree of the Federal Reserve and U.S. government.

Schiff is of course the president of Euro Pacific Capital, an investment firm he runs.

Peter Schiff - Collapsing U.S. Dollar

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.

US Dollar Carry Trade Currency?

The statement from the Federal Reserve that slow economic conditions "warrant exceptionally low levels of the federal funds rate for an extended period," caused great pause today for those understanding what this will mean for the U.S. dollar, as it will probably take the place of the yen as the currency used for carry trades.

A carry trade is when an investor borrows using a currency with low interest rates for the purpose of investing that capital in higher-yielding assets. The problem with that is it is bad for the currency used as the investment of choice to start the process, which looks to be the U.S. dollar through probably a minimum of 2010.

The Federal Reserve said these conditions will continue, essentially reinforcing the reality that the U.S. dollar will be the carry trade currency going forward, although obviously not stating that specifically.