The dollar's decades-long position as the global reserve currency is in jeopardy because of steps the United States has taken to support its economy during the Covid-19 pandemic, says Ray Dalio, the founder of hedge fund giant Bridgewater Associates.
His comments came as the yuan hit a new high in 16 months, though analysts saw less room for further appreciation.
While equities and gold benefited from the trillions of dollars in fiscal spending and monetary injections, those efforts are debasing the currency and have raised the possibility that the United States will go too far in testing the limits of government stimulus, Dalio said in an interview with Bloomberg Television.
"There is so much debt production and debt monetization," he said.
The Bloomberg Dollar Spot Index has dropped 10 percent from its peak in late March as investors responded to the pandemic and efforts by central bank and government officials to contain the economic fallout.
All of the world's major developed currencies have gained against the dollar, as have precious metals such as gold, silver and platinum.
Dalio said in July that investors should favor stocks and gold over bonds and cash because the latter offer a negative rate of return and central banks will print more money.
Meanwhile, the onshore yuan strengthened 162 basis points to 6.7613 per US dollar.
"There is scope for further yuan gains before the authorities start to become concerned about excessive strength," said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group , adding that a lack of pushback from Beijing has encouraged him to become more bullish. "It is very likely for the yuan to hit 6.7 in the near term."
Beijing will likely slow appreciation by issuing weaker fixings and relaxing capital controls if the yuan basket rises another 2 percent, Goh said.