In his latest market commentary, top fund manager John Hussman continues to express a bearish view, and says that more quantitative easing by the Federal Reserve is likely to trigger “an abrupt collapse in the foreign exchange value of the U.S. dollar”.

Hussman offers something of a primer on exchange rates, and concludes by saying this: “The policy of quantitative easing is likely to force a large adjustment on the U.S. dollar because the Federal Reserve is choosing to lay a heavier hand on the Treasury bond market than would result from economic conditions alone,” he says. “The resulting shift in interest rates and long-term inflation prospects combine to dramatically reduce the attractiveness of the U.S. dollar. A significant and relatively abrupt devaluation is then required, in an amount sufficient to set up expectations of a U.S. dollar appreciation over time.”

As for the market, Hussman says he continues to see unfavorable valuations, unfavorable market action, and unfavorable economic pressures. The Fed’s new go at quantitative easing may well limit deflationary fears, he says, which has led him to increase exposure to precious metals and foreign currencies. Hussman also says the U.S. should focus on restructuring debt, and offers his take on how it should do so.