Goldman Sachs Asset Management is betting a rally that propelled the US dollar to a seven-week high will fizzle.
The money manager expects the US Federal Reserve to forgo an interest-rate increase this week even after a report on Friday showing US inflation rising faster than economists forecast drove the greenback higher.
Parent Goldman Sachs Group Inc cut its forecasts for gains in the US currency versus the yen, saying it is “not optimistic” about the outcome of the Bank of Japan’s policy meeting this week.
Hedge funds and other speculative investors trimmed bullish US dollar positions last week.
The US dollar yesterday fell against most of its counterparts.
“Over the medium to longer term, we continue to expect US dollar weakness versus G-10 and emerging-market currencies,” the asset-management firm said in a note to clients dated Friday last week. “We expect no move in September, but anticipate the Fed will signal that a rate hike is still possible this year, while the pace of tightening will be even more shallow and gradual than previous Fed projections.”
The Bloomberg Dollar Spot Index fell 0.3 percent at 6:50am in London from Friday, when it jumped 0.7 percent to close at its highest level since July 28.
The Australian dollar rose 0.7 percent to US$0.75, while the pound climbed 0.3 percent to US$1.3047.
The yen advanced 0.2 percent to ￥102.05 per US dollar and the euro gained 0.1 percent to US$1.1171.
Japanese markets were closed yesterday for a public holiday.
The New Taiwan dollar jumped 0.8 percent to NT$31.450 against its US counterpart and the Singaporean dollar rose 0.3 percent to S$1.3637.
The South Korean won was little changed after declining as much as 0.7 percent as the nation’s markets opened after a three-day holiday.
Goldman Sachs Asset Management said it reduced bets seeking to profit from declines in Asian currencies, including the Singapore and New Taiwan dollar, as well as the won, after the latest Chinese data showed the world’s second-largest economy had stabilized.
Hedge funds and money managers cut net bullish positions on the US dollar for the week ended on Tuesday last week, according to data from the Commodity Futures Trading Commission. Bets that the US dollar would rise outnumbered bearish positions by 113,195 contracts, down from 119,066 in the previous period.
Futures imply a one-in-five chance of Fed action tomorrow and a 55 percent chance by year-end.
The Bank of Japan decides policy the same day this week, with forecasts for action by analysts ranging widely. That is complicating the job of currency traders trying to position for the event. Japan became the epicenter of a global bond sell off this month, amid speculation the central bank will pull back from buying long-term bonds after Japanese Governor Haruhiko Kuroda ordered a comprehensive review of its easing program.
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