- Harmonic Capital sees greenback strength helping Fed hold
- Manager projects gains versus yen, euro and Canadian dollar
The dollar’s 12 percent surge during the past year may prove its undoing, according to a London-based hedge fund that’s betting against the greenback.
Harmonic Capital Partners LLP, which has about $1.6 billion under management, expects the U.S. currency to fall as the greenback’s strength gives the Federal Reserve room to hold rates lower for longer, prompting weakness, Per Ivarsson, a partner at the money manager, said during an interview at Bloomberg headquarters in New York. That goes against median forecasts, which put the dollar stronger versus nine of its 10 major peers by year-end.
“The Fed’s got an opportunity to hold off a bit because the currency’s so strong,” he said. “I can see them being a bit dovish, data being a bit mixed because of the strong dollar, because of global concern, and that will weaken the dollar a bit in the short term.”
The dollar’s meteoric rise has stalled in recent months amid signs U.S. policy makers may hold borrowing costs near zero through this year. Volatility that spread from China to markets around the world in August stayed their hand in September, while worse-than-forecast economic reports at home since have seen traders push out bets on a rate increase to 2016. A strong dollar is tightening financial conditions, but also weighing on inflation, Ivarsson said.
Harmonic Capital sees the dollar slipping versus the yen, euro and Swedish krona, as well as the New Zealand and Canadian dollars. The company trades using four- to six-week forward contracts, Ivarsson said.