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Fund Managers Reveal Their Currency Strategies - BLOOMBERG
These are some of the strategies fund managers such as AMP Capital Investors Ltd. and Amundi SA are adopting as the dollar becomes rangebound amid concern President Donald Trump will fail to enact his reflation policies.
"The dollar's weakness has been broad-based," said Sydney-based Naeimi, who heads a dynamic investment fund at AMP Capital, which oversees $120 billion. "But instead of buying the dollar here, I'd use a bounce as an opportunity to add to shorts."
After surging in the last three months of 2016, the U.S. currency gave up about half those gains in the first quarter of this year as investors grew tired of waiting for details of Trump's fiscal-stimulus program. Even a Federal Reserve interest-rate increase in March and the prospect of further tightening failed to reinvigorate the greenback.
The Bloomberg Dollar Spot Index fell to a four-month low last week on concern Trump will struggle to steer his promised tax cuts through Congress after failing to overturn former President Barack Obama's health-care plan. Declines were halted as the gauge bounced off its 200-day moving average.
Hedge funds and other large speculators turned net sellers on the dollar for the first time in four weeks in the period ended March 28, according to the latest data from the Commodity Futures Trading Commission in Washington.
The greenback will find it difficult to regain momentum as the global divergence trade that contrasted strengthening U.S. growth with weaker economies elsewhere appears to be over, according to Amundi, Europe's largest asset manager.
"As the market has shifted from U.S. reflation to global reflation and from divergence in policy to convergence, the dollar will find it difficult to outperform," said James Kwok, the London-based head of currency management at Amundi, which oversees more than $1 trillion.
Investors are betting the European Central Bank will start raising borrowing costs before it ends quantitative easing, while most economists see the Bank of Japan as finished with adding stimulus under Governor Haruhiko Kuroda.
Not everyone sees the dollar staying trapped in a range.
Hedge-fund manager Tony Bradley said he remains optimistic on U.S. economic growth and is bullish on the greenback, predicting it will strengthen to 120 yen and advance beyond parity with the euro.
"In the medium term, this is a buying opportunity for dollars," said Bradley, a partner at Hunter Burton Capital in Sydney. "But the market is trading more politically than economically at the moment."
The dollar was at 111.34 yen as of 11:45 a.m. in Tokyo on Monday, after staying largely between 110 and 115 during February and March. The greenback was at $1.0680 per euro after failing to sustain itself beyond $1.05 in the same period.
The money managers' other positions include:
AMP Capital's Naeimi