Hedge-Fund Veteran Says Euro Slide Almost Over, UBS Agrees

  • Vulpes's Diggle plans to invest more in German properties
  • Euro may appreciate to as high as $1.10 in 6-12 months: UBS

Stephen Diggle, who co-founded a hedge fund that made $2.7 billion in 2007 and 2008, said the euro’s slide is almost over and his German property holdings will benefit. UBS Group AG, the world’s largest private bank, agrees further losses are set to be limited.

The euro tumbled to a seven-month low against the dollar this week as investors assessed the impact of Friday’s terror attacks in Paris on the region’s stuttering economy. The single currency has weakened more than 6 percent since European Central Bank President Mario Draghi signaled on Oct. 22 that policy makers are open to boosting stimulus, even as the Federal Reserve moves toward raising rates. 

“Of course the euro can go lower, but I doubt it would go a lot lower, especially as we don’t see the U.S. economy racing ahead,” said Diggle, chief executive officer of Singapore-based family office Vulpes Investment Management, speaking in an interview. “We are extremely sanguine about Germany and the euro and our housing investments.”

The euro was little changed at $1.0646 as of 7:21 a.m. in London on Wednesday after declining to $1.0631 Tuesday, the weakest since April 16. The last time the two currencies traded at parity was in December 2002.

Bears Retreat

Options traders have been cutting positions that would benefit from a weaker euro. The premium on three-month contracts giving the right to sell the shared currency over those to buy narrowed to 1.20 percentage points Wednesday, from as wide as 1.77 on Oct. 26, data compiled by Bloomberg show.

The euro may decline to parity if the Fed raises rates in December and the ECB expands stimulus, though this will probably be short-lived, said Kelvin Tay, regional chief investment officer at UBS’s wealth management business in Singapore.

The single currency may appreciate to as high as $1.10 in six to 12 months as investors are likely to be drawn to European stocks because earnings growth is set to outpace that in the U.S. and Asia-outside-Japan, he said.

“Parity could perhaps be reached but for a very, very short time; not for a prolonged period,” Tay said. “The bounce back up is likely to be quite fast as well, largely because it won’t be a sharp increase in U.S. rates.”

German Apartments

Vulpes’s Diggle, plans to pour more money into housing investments in Germany, where his fund has already bought more than 1,200 apartments, he said. A measure of German investor confidence rebounded in November, the ZEW Center for European Economic Research said Tuesday.

Diggle, a graduate of Oxford University who worked at Lehman Brothers Holdings Inc. before co-founding a hedge fund, said bonds and equities are relatively expensive "against a pretty worrying backdrop of a global economy stuck in second gear.”

“We continue to focus on things that will do well in such an uninspiring environment, with German real estate still our number one thematic idea,” he said.

Before it's here, it's on the Bloomberg Terminal.