BlackRock chief Larry Fink warns on strong US dollar

The steep rise in the US dollar risks undermining business confidence in the US and sending the country's economy into a slowdown, the head of the world's largest asset management firm is warning.

Larry Fink, chief executive of BlackRock, plans to express his concerns in a foreword to the company's annual report, due out next week. The warning comes against the backdrop of the 25 per cent rise in the dollar versus a basket of other currencies in the nine months from last June to March.

Mr Fink says that the impact of the dollar's appreciation will be felt beyond the export sector, which was the immediate casualty. His statement stands in contrast to his previously sanguine views on equity markets, and comes even though he sees a boost to the US economy from lower oil prices.

"While the US economy as a whole is not overly exposed to exports, many of our largest and most influential companies are," Mr Fink has written.

"We believe that this will lead to an erosion in confidence on the part of CEOs with the potential to slow both investment decisions and future growth in the US."

Other executives at BlackRock, which controls $4.7tn of assets in global financial markets, have also expressed concern about the effect of the strong dollar, which they say is hurting the US economy.

Its chief investment officer for fixed income, Rick Rieder, said after Friday's US jobs report that the weaker than expected number reflected the damage done to exporters, as well as other factors including the weather.

The dollar index, which measures the greenback against other currencies, has fallen back in recent weeks amid disappointing economic data from the US, although central bank policies in Europe and Japan continue to exert downward pressure on the euro and the yen.

In his chairman's letter, Mr Fink also highlights the risk that monetary easing has inflated asset bubbles as investors such as pension funds searching for yield in a low interest rate environment are pushed into riskier asset classes. The situation is "worsening every day", he writes.

"This mix of growing assets and shrinking yields is creating a dangerous imbalance. Yet monetary policy makers seem insufficiently attuned to the conundrum their actions are creating for investors: reach for yield and continue to fuel an expanding bubble, or remain on the sidelines and watch unfunded liabilities grow unchecked."

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