Paresh Upadhyaya has dumped the US dollar, for now.
The director of currency strategy at Pioneer Investments is no longer betting on greenback strength, for at least the next three months. That is because US Federal Reserve Chair Janet Yellen said on Tuesday the central bank would “proceed cautiously” due to heightened risks in the global economy, helping the US dollar cap its biggest quarterly loss in more than five years.
“I’ve been this dollar bull now for about two-plus years and I officially threw in the towel after the Yellen speech,” Upadhyaya, whose company oversees about US$236 billion, said by phone from Boston on Friday.
“I essentially closed my long-dollar positions across the board,” he said, referring to bets that the currency would rise.
A gauge of the greenback tumbled 3.9 percent last month, the most in more than five years, after the Fed pared projections for rate hikes at its latest meeting. The US dollar decline extends a two-month slump on speculation that the Fed would refrain from tightening policy while its counterparts add stimulus as the outlook for global growth cools.
The US dollar fell 2 percent this week against the euro to US$1.1391, its biggest loss since Feb. 5. It lost 0.8 percent to ￥111.69.
In Taipei, the greenback slid 1.2 percent this week to NT$32.378. The US dollar rose NT$0.096 on Friday to close at the day’s high, snapping a four-day losing streak, as regional currencies weakened.
Upadhyaya sees the greenback weakening to a range of US$1.15 to US$1.20 per euro in the next six to 12 weeks.
Hedge funds and money managers cut net bullish positions on the US dollar to the lowest level since 2014, according to data from the Commodity Futures Trading Commission. Bets that the US dollar would rise outnumbered bearish positions by 66,441 contracts for the week ended Tuesday, down from 87,902 a week earlier.
The greenback declined versus the euro and yen on Friday even after the US Department of Labor data showed US employers added more workers than projected last month and wages strengthened.
Traders on Friday put the chances of the Fed raising rates at its June meeting at 24 percent, down from 38 percent a week earlier, according to data compiled by Bloomberg. The calculation assumes the effective fed funds rate would average 0.625 percent after the central bank’s next increase.
For the pound, however, the past three months were the most volatile since June last year against the US dollar — and a gauge of future price swings suggests there is more to come.
Sterling has declined about 3.6 percent this year, accelerating its drop after the referendum on Britain’s membership to the EU was set for June 23, and prominent Conservative party politician Boris Johnson announced his support for the campaign to leave. A gauge of implied volatility in the pound-dollar exchange rate in three months’ time, based on options, was near the highest level since 2010.
Against the euro, sterling tumbled to its weakest level since 2014 this week after a report showed a gauge of manufacturing output held near the lowest since 2013. Reports next week on the services sector, as well as industrial and manufacturing production, would give traders further insight into the extent to which the UK economy is faltering.
“Sterling is certainly going to be volatile,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt.
“Sentiment towards the pound is very, very shaky, with the ‘Brexit’ vote coming closer,” she said, referring to a possible British exit from the EU. “I cannot exclude that if the data next week disappoints that we will rise even further in euro-sterling.”
The pound slumped 1.1 percent to US$1.4199 as of 4:52pm in London on Friday, deepening a 2.6 percent decline from the first quarter. Sterling fell 1 percent to ￡0.8009 per euro, after reaching ￡0.8020, the weakest since November 2014.
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