Legendary emerging markets investor Mark Mobius thinks that the attraction of U.S. dollars and Treasuries will start to wane. From the CNBC website yesterday:

Despite continued woes in the U.S. economy, the greenback has seen an unexpected surge against currencies around the world.

As investors become ever more risk averse, emerging markets are bearing the brunt of a flight to safety.

But Mark Mobius, executive chairman of Templeton Asset Management, sees a reversal around the corner.

“As everyone is rushing into US Treasurys, they need U.S. dollars to do that and have therefore sold everything in sight,” Mobius told CNBC.

“This is why emerging markets have gone down, why commodities have gone down. as everyone is moving into dollars.”

But Mobius said that “as US Treasury rates go down to 1 percent or below you will see the attraction of US Treasurys waning.”

Mobius also believes that emerging markets have learnt a bitter lesson since the Asian Crisis of 1997-1998.

“One big lesson was ‘don’t borrow in a currency you are not earning in’,” he said.

Source:

“Appeal of Dollar, Treasurys Can’t Last: Mobius”
CNBC, November 20, 2008

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