Dealth of Dollar & How Real It Is - Rupesh Gaikwad, Shreyak Shah, Suvrat Dayal, Vinayak Sanil

7/26/2019 Dealth of Dollar & How Real It Is - Rupesh Gaikwad, Shreyak Shah, Suvrat Dayal, Vinayak Sanil

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Death of Dollar: How

Real It Is?

Presented By:

Rupesh Gaikwad 164Shreyak Shah 14Su!rat Dayal "#"$inayak Sanil ""1


2/13

Introduction

History

Current Scenario

Conclusion

%low of Presentation


3/13

Bretton &oods Syste' (1)44*1)+1,

US Dollar accepted as a universalReserve Assets.

Gold Convertibility Clause.

Reasons For Decline

Vietnam War !"#$%$!&.

Doubts in International 'ar(ets.


4/13

Petro Dollar &ar

A)ter !"$! US cut a deal *it+ ,-C.Countries needed dollar reserves to

buy oil. Ira/ started sellin0 oil in uro 1222&.US invadin0 Ira/ 1223&.Revert sale o) oil in Dollars.


5/13

Su-pri'e .risis


6/13

&hat/s wron0 with thedollar ?

Greenbac( resumes its slide.Appre+ension about t+e 0apin0 U.S.

)ederal de4cit and5or )ear o) runa*ayin6ation 7

U.S. trade balance in 0oods 8services.


7/13

Inreased risk toleraneout2ow of short*ter' funds

9et capital in6o*s +ave beenne0ative most o) t+is year.

Combination o) a modest tradede4cit 8 net capital net capitalout6o*s )rom U.S. +as e:ertedpressure on dollar.

U.S. s+ort%term ;%bill purc+ases2 bn in second +al) o)122>.


8/13

ontd3

U.S. ban(s lent billions o) dollars in0ood times to )orei0n ban(s but

ti0+tened credit lines *+en crisisbe0an.

Forei0n ban(s *ere )orced toscramble )or dollar li/uidity.

;+is contributed to dollarappreciation bet*een ?uly@2> to'arc+@2".


9/13

ontd3

As 0overnments too( steps to stabilie0lobal 4nancial systemB investors becomemore tolerant o) ris( a0ain.

FI no* in searc+ o) +i0+ yields else*+ereo)ten in t+eir o*n countries.

Depreciation o) dollar t+is year un*indin0

o) one%o )actors t+at led to itsappreciation. Spi(e in ris( aversion led to FI see(in0 to

invest in U.S. ;%bill.


10/13

et in2ows of lon0*ter' seuritiesweakened

Ee+aviour o) net purc+ases o) lon0%termsecurities +as also contributed topressure on t+e dollar.

-urc+ase o) )orei0n securities by U.S.investors *as in ne0ative in second +al) o)122>.

Forei0n purc+ases o) U.S. lon0%termsecurities *ea(ened. In 4rst seven mont+s o) 122"B FI bou0+t

=1$" bn vs =#1 bn at same time last

year.


11/13

ontd3

Wea(enin0 in sale o) U.S. corporatebonds by FI re6ects net sales o)

securitied 4:ed%income securities. In contrastB )orei0n purc+ases o) U.S.

stoc(s stren0t+ened )rom =1> bn in4rst seven mont+s o) 122> to =$> bnso )ar in 122".


12/13

ontd3

As per FRE9B )orei0n central ban(scontinue to buy ;reasury securities.

;+ese +oldin0 +ave increased to=322 bn since 'arc+@2".Since 'arc+@2"B FI +ave bou0+t =!3

bn o) lon0%term ;reasury securities.


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.onlusion

At end o) ?une@2>B )orei0n +oldin0 o) U.S.;reasury notes 8 bonds totaled =1.1 trn. Forei0n central ban(s +old nearly =!.$trn&

+al) o) mar(etable supply o) lon0%term;reasury securities outstandin0. W+at can reverse dollar@s recent slide 7

A return o) ris( aversionHi0+er rates o) return on dollar assets

*ill attract capital in6o*s dollar

Dealth of Dollar & How Real It Is - Rupesh Gaikwad, Shreyak Shah, Suvrat Dayal, Vinayak Sanil

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