This Hedge Fund Sees No Haven to Escape Global Currency Turmoil

There are no safe-haven currencies to park assets in right now amid market volatility sparked by the devaluation of the yuan, said Charlie Chan, a former Credit Suisse Group AG trader who now runs his own hedge fund.

Chan, the founder of Singapore-based Charlie Chan Capital Partners, said he is staying on the sidelines before seeking to spot currency trends. After saying in June his fund had been betting on a stronger yen versus the dollar, he said the Japanese currency will stay mostly unchanged in coming days.

“Over the last two weeks, the market has been chaotic,” Chan, whose fund manages just under $200 million, said in an interview on Monday. “Whatever theories you had are probably less relevant right now. I have a wait-and-see position at the moment.”

A rout in global stock markets has wiped out more than $8 trillion since China’s unexpected devaluation of the yuan on Aug. 11, with losses deepening on Monday. Commodities and currencies including the Malaysian ringgit and the New Zealand dollar have tumbled as investors have fled all but the safest assets.

The Swiss franc, euro and yen were the best performers among 10 developed-nation peers in the past week, according to Bloomberg Correlation-Weighted Currency Indexes, while the dollar fell to a seven-month low against the euro amid concerns the Federal Reserve might postpone interest rate increases. Chan expects the dollar to trade sideways against the euro in coming weeks.

“It has rallied a lot and I don’t think there is much more to come, in particular since the Fed moves are priced in,” Chan said.

Paring Gains

The dollar gained 0.7 percent to $1.1542 per euro at 1:14 p.m. in Tokyo after falling to $1.1714 on Monday, the weakest since Jan. 15.

After climbing 12.5 percent this year through June, Chan’s Splendid Asia Macro Fund has since pared gains. The fund made “single digit” returns so far this year, Chan said.

“I didn’t expect markets to come off and risk climbing so much,” he said.

Chan said the Fed will start raising interest rates this year, either in September or in December.

“They are trying to get it out of their way as it will take a long time for them to edge rates higher,” he said.

Still, futures traders are starting to bet the Federal Reserve will put off raising interest rates. Contracts on the fed funds rate show traders cut the odds of a September increase by the Fed to 26 percent on Monday, from 54 percent on Aug. 7. The figures are based on the assumption that the effective Fed funds rate will average 0.375 percent after the first increase.

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