World's Top Currency Trader Says Take Profit on Dollar Advance

Take the Money and Run: Strategist on Dollar Positions
  • U.S. rate speculation has boosted greenback against most peers
  • Futures show 74% probability of Fed liftoff in December

The world’s biggest currency trader says the time has come to close out trades that benefited from the dollar’s rally.

After a world-beating surge on speculation the Federal Open Market Committee will raise interest rates this year, the U.S. currency is unlikely to appreciate further once liftoff occurs, according to Citigroup Inc., which topped Euromoney Institutional Investor Plc’s annual industry rankings for 2015.

An anticipated increase in monetary stimulus by the European Central Bank next week won’t boost the greenback against the euro either, Steven Englander, the bank’s New York-based global head of Group-of-10 currency strategy, wrote in a note.
 
“Investors should not wait until FOMC to take profit,” Englander wrote in the Nov. 23 note. “If you are long dollars right now, the FOMC has no incentive to please. No one will be cheering the dollar up.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 major counterparts, has climbed 8.8 percent this year. The greenback weakened 0.1 percent to $1.0649 per euro at 4:50 p.m. London time, after touching $1.0593 on Monday, the strongest level since April. It fell 0.3 percent to 122.50 yen.

Futures indicate a 74 percent chance of the Federal Reserve committee raising its benchmark rate at its next meeting, according to data compiled by Bloomberg. That’s up from 50 percent odds at the end of October. The calculation assumes the effective fed funds rate averages 0.375 percent after the first increase, compared with the current zero-to-0.25 percent target range.

A 10 basis-point cut to the ECB’s minus 0.2 percent deposit rate at its policy meeting on Dec. 3 is now fully priced in, according to futures data. Some banks are predicting more. Royal Bank of Scotland Group Plc and DZ Bank AG both forecast the ECB will reduce the rate by 20 basis points, or 0.2 percentage point.

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