Market News International writes:
"Merk Hard Currency Fund Portfolio Manager Axel Merk expect[s] the U.S. dollar to come under further pressure as the subprime mortgage problems only reflect one aspect of a larger credit issue, as the entire U.S. economy relies on credit.
After the Bear Stearns problems, 'The risk is being priced back in by markets,' Merk told Market News International, expecting hedge funds to be requested by their investors to have a stronger collateral.
CDOs 'are not useful as a collateral because you can't sell them,' Merk said, citing the lack of liquidity for this market...
'Hedge funds have to reduce their leverage,' Merk commented.
With the entire U.S. economy 'very leveraged,' which is reflected in a large current account deficit, the credit tightening induced by the markets will have investors even less inclined to buy the greenback, he predicted."
