Financial Times

Currency crisis on way, says investor

By Lindsay Whipp in Tokyo

Published: November 2 2009 02:00 | Last updated: November 2 2009 02:00

Jim Rogers, the international investor and chairman of Rogers Holdings, has warned of a currency crisis within the next couple of years.

"I do expect [a] currency crisis or semi-crisis in the next year or two because there are so many imbalances in the world," Mr Rogers told the Financial Times in an interview.

"That may sound radical but it's always worked that way - whenever there have been lots of problems, there have been problems in the currency markets."

However, he did not know which currency would be the focus of such a crisis.

"Normally what happens is you have small countries you don't think about, something goes wrong and it starts snowballing and people say: 'how did that happen?'," said Mr Rogers. "That's going [to happen] again before too much longer."

Iceland and Latvia are two European countries whose currencies have suffered dramatic declines as a result of the financial crisis.

Mr Rogers said that the problems of the financial crisis have only been "papered over" and not solved. Some governments that have taken on too much debt may have problems meeting their obligations and may have to print more money in response, which would lead to more inflation, currency turmoil and commodity appreciation, he said.

Mr Rogers said that the strong rally in Chinese shares this year meant that he was not buying at the moment but he still has not sold a single Chinese share since he started investing in the late 1990s.

At a seminar organised by ETF Securities last week, Mr Rogers also said that he does not buy A-shares, or renminbi-denominated shares traded on mainland China that some qualified overseas investors can buy and sell. This is because they are more expensive than other types of accessible Chinese shares, such as H-shares, traded in Hong Kong.

Regarding Japan, Mr Rogers told the seminar that he was holding some yen and expected the Japanese currency to appreciate in part because it is a creditor nation, because of the diminishing use of it as a carry-trade currency given the other options available, and because of government incentives for repatriation.

Interview transcript, Page 16 Video: