Dollar at a low: Is the dollar about to crash?
The USD has been weak for years – now it is trading at a level rarely seen before. How should investors respond?
The dollar has recently fallen below 0.8 Swiss francs again. This continues the trend of dollar weakness that has been observed for some time now.
Will the US dollar continue to lose value against the Swiss franc? Or will there even be a dollar crash? "No, we do not expect a dollar crash," says Iwan Deplazes in a TV interview on the programme ‘Geld & Vorsorge’. "However, we will continue to see pressure on the dollar. This is because the US administration is clearly in favour of a weaker dollar and the Swiss currency is structurally strong," says the Head of Asset Management at Zürcher Kantonalbank.
Don’t be misled by record levels
Under these circumstances, it is important for Swiss investors not to invest all their savings in US assets. They should not be blinded by the record highs of the American stock market either. In CHF terms, the US stock market still lags significantly behind the Swiss stock exchange.
As a result, diversification is more important than ever. According to Deplazes, this includes investments in emerging markets and Swiss equities.
An interesting insight in this regard: Swiss small- and mid-cap stocks have recently performed well – even significantly better than the large-cap companies in the Swiss Market Index (SMI).
Will gold continue its ascent?
Other investments are also rising in tandem with the USD’s decline. "Yes, we do indeed expect continued upward pressure," Deplazes predicts for gold. Looking back: Since the beginning of the year, the price per ounce has risen by around 42% to a record high of approximately USD 3,740. Three years ago, an ounce was trading at about USD 1,620.
The weak dollar is a key driver behind gold’s surge. Since gold is traded in USD, a weak dollar makes it more attractive for investors outside the US, as the purchase price in their local currency is lower. Demand for the precious metal is further supported by central bank purchases, particularly from emerging markets.
You can watch the full interview with Iwan Deplazes here (only in Swiss German).
