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The market is ignoring severe dangers inherent in US-China relations, warns Asia skilled Stephen Roach

There is a significant risk of attracting economist Stephen Roach's attention, and it has nothing to do with profitable season.

Roach, one of the world's leading authorities in Asia, fears that US-China ties may continue to dwindle in the coming weeks.

"There are a lot of balls in the air right now that are very worrying," the former Morgan Stanley Asia chairman told CNBC's "Trading Nation" on Wednesday. "You have a real problem here that worries me very much and I think the markets are completely ignoring it."

Roach sees the support of both parties in the Senate for the Strategic Competition Act of 2021 as a worrying development. His reason: It reflects a tough approach against China that could spark retaliation.

"I fear in recent years that what started as a trade war would turn into a technology war and eventually turn into a cold war," said Roach. "These fears have been fulfilled. Only this week are there significant developments that lead me to underline this risk."

He also names a new US intelligence report as particularly worrying.

"The annual threat assessment, released yesterday [Tuesday] by the National Intelligence Agency, clearly identified China as America's greatest threat," said Roach, who is also overseeing tensions between China and Japan.

According to Roach, President Joe Biden will appear to continue many of the Trump administration's actions against China.

Roach warns of mounting US-China tensions over a dollar crash call. Late last spring, he predicted that the greenback would fall 35% against other major currencies in the next year or two.

"The dollar fell sharply in the second half of 2020. It reversed its course in the first quarter of this year and is now under downward pressure again," said Roach. "It reflects my concerns about the current account deficit in the United States, the unwillingness of the Fed to cut interest rates for the foreseeable future, and the possibility that Europe may become more involved in fiscal policy than any of us thought. "

He is also concerned that the current background with China could exacerbate the risk.

"They are adding to the pressure on America's role as world leader that may come into play through friction with China, and I believe that the US dollar remains at a significant disadvantage," said Roach.

The US dollar currency index is down nearly 1% over the past week. It's down more than 7% in the past year.

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