Hedge Fund Guru Says Dollar Could Slump

by Carla Johnson, Investors Offshore, London

02 July 2002

Billionaire George Soros retired from hedge fund management more than five years ago, but still advises the funds he once led, and has a high public profile for his sometimes maverick views on world economic trends.

According to the Wall Street Journal, Mr Soros spoke to a small group of financial journalists in London this week, saying he wouldn't be surprised if the dollar loses a third of its value during the next several years. He also said that markets could go much lower if key governments, such as the US administration, don't take the right policy steps.

Mr Soros said that the news of corporate misdemeanours in the US has frightened off the foreign investors who have been financing the US trade deficit. Against the euro, the dollar has fallen about 10% so far this year. Trends in currency markets tend to last several years and involve major swings, he said, so a drop of around a third in the dollar's value from recent levels "would not be unprecedented."

The danger Mr Soros sees is that the dollar's fall will frighten US consumers. But he is 'agnostic' on whether consumers will stop spending, and recommends keeping a close watch on such things as US auto sales, the housing market and unemployment.

However, according to the newspaper, the fabled investor is not himself unduly pessimistic: "Right now we are at a level of excessive pessimism, and we are liable to have a rebound in the near term," he added.

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