Goldman Sachs Asset Management is seeking to profit from the relative value of the world’s major currencies after trimming bets the dollar would climb versus the euro and yen.
While the Federal Reserve will probably increase interest rates by
another 25 basis points later in the year, any disappointment around US employment data could delay the next move to 2017, dimming the allure of the greenback, said Philip Moffitt, Goldman Sachs Asset Management’s Asia-Pacific head of fixed income. The money manager, which oversees more than $1 trillion in assets, had
predicted as many as two rate hikes this year.
The manager is wagering on declines in the Aussie dollar versus its New Zealand, Canadian and Swedish counterparts, with the Reserve Bank of Australia set to cut its key interest rate to 1.5 percent by the end of the year, he said.
It is also seeking to profit from weakness in Asian currencies, including the South Korean won, Taiwan’s dollar and Malaysian ringgit amid a slowdown in China.
“We’ve reduced big directional risk,” Moffitt said in a phone interview from Sydney. “We’ve got much more relative-value type trades on.”
Goldman Sachs Asset Management also has a small position that seeks to profit from further strength in the Russian ruble as investors seek higher-yielding assets, Moffitt said. Central banks from Europe to China are adding to monetary stimulus and expectations for interest-rate increases in the US have waned, he said. The ruble has surged about 12
percent versus the dollar this year, and it was the best performer among emerging-market currencies after Brazil’s real.
“There is still a surplus of global capital that’s going to be looking for relatively high yielding assets,” Moffitt said.
The euro and yen are set to remain rangebound versus the dollar and are unlikely to appreciate or depreciate by more than 5 percent in the coming months, “until something big changes,” Moffitt said.
The yen has surged about 12 percent and the euro gained almost 5 percent versus the greenback this year, defying analysts’ prediction in January that they would weaken on monetary policy divergence. The stability of current-account surpluses in Europe and Japan will continue to support the euro and yen should markets go into a tailspin again, Moffitt said.
“We’re working hard to find really good ideas at the moment because you’ve got these two competing trends,” he said. “We’ve not had a very established trend.”
Hedge funds and other large speculators boosted bets against the dollar to the highest since April 2014 as of May 3, after turning net bearish last month, Commodity Futures Trading Commission data show. Traders see an even chance of a US rate increase this year and only an 8 percent probability of a move in June, after policy makers acted in December.
“There’s a chance that they do nothing or very little,” Moffitt said. “Certainly nothing in the next couple of months.”