AllianceBernstein Stops Bets Against Dollar, Starts Shorting Euro, Pound
AllianceBernstein Stops Betting Against Dollar, Shorts Pound
Daniel Acker/Bloomberg
AllianceBernstein is also betting on a weaker euro and British pound, as well as strength for Scandinavian currencies and the Swiss franc.
AllianceBernstein is also betting on a weaker euro and British pound, as well as strength for Scandinavian currencies and the Swiss franc. Photographer: Daniel Acker/Bloomberg
AllianceBernstein LP, a New York- based fund manager with $460 billion in assets, said it ended its bets against the dollar as the debt crisis in the euro region deteriorates.
The U.S. unit of French insurer Axa SA (CS) has moved to a so- called neutral position on the dollar, according to Anthony Chung, its London-based director of research and currency strategies. That means its holdings match the weight suggested by indexes used to benchmark performance. AllianceBernstein is also betting on a weaker euro and British pound, as well as strength for Scandinavian currencies and the Swiss franc.
“The dollar is cheap at the current level, as a lot of bad news has been discounted,” Chung said in an interview. “We are slightly more positive on the dollar now. We were a bit short three months ago. Another reason is that the debt problem in Europe is getting worse.”
The dollar is up 2.3 percent against the euro this month, heading toward its first quarterly gain in three. The currency has declined 5.8 percent against the euro so far this year. The Organization for Economic Cooperation and Development’s measure of purchasing power parity suggests the dollar is 8.3 percent undervalued against the euro.
Portugal and Ireland followed Greece this month in having their credit ratings cut below investment grade. European leaders are struggling to convince investors that they will agree on a second Greek bailout at a summit this week as the crisis threatens to spill into Spain and Italy.
‘Ugly Contest’
Chung said he stopped short of betting on a dollar gain given the U.S.’s own indebtedness and budgetary standoff. AllianceBernstein also doesn’t expect an economic slowdown or substantial unwinding of riskier trades, scenarios that would boost the haven appeal of the dollar.
“Consistent with our view of slow and uncertain economic recovery, we are cautiously bullish on the market,” said Chung, who studied under Federal Reserve Bank of Minneapolis President Narayana Kocherlakota at Stanford University. “Our dollar positions have been fluctuating between slightly negative to slightly positive. We find it difficult to have a long-term positive proposition on the dollar.”
While both euro region and the U.S. are grappling with their debt, the European Central Bank’s monetary policy posts a greater challenge for the euro, he said.
“The difference between policy makers in Europe and in the United States is that the ECB puts more emphasis on inflation targeting,” said Chung. “That has created some kind of tension in the euro area because not all economies are strong enough to accommodate a tighter monetary policy.”
Overall, AllianceBernstein does not currently have “large exposure” to the dollar, the Japanese yen or European currencies, Chung said.
“When you look at some of these major currencies, you can say it’s a contest of the ugly,” said Chung. “There is no good way that you can really pick a currency and be confident enough to sit on it for a long time. We have to actively manage our portfolio.”
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net;
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