Bridgewater's Dalio Says Draghi Right, Investors Got It Wrong

  • Thursday's euro moves about ``erratic behavior'' of traders
  • Dalio says Draghi will reach his 2 percent inflation target

Bridgewater Associates’s Ray Dalio says traders shouldn’t fade Mario Draghi.

Dalio, who runs the $154 billion asset management firm, said in written comments released by the firm on Friday that the more than 3 percent jump in the euro on Thursday -- its biggest move since March 2009 -- had more to do with a knee-jerk reaction by traders than with good analysis of the European Central Bank president’s policies.

Many money managers had shorted the euro against the dollar because they were expecting an aggressive movement by the central bank, and a euro selloff was virtually guaranteed, Dalio said in his note. The more the market discounts that Draghi will move inadequately, the more likely it is that the ECB will move at an accelerated pace, Dalio said. 

“Draghi will continue to take adequate actions to reach the 2% inflation target,” Dalio wrote. “At all key moments, he has done the right things and the whole world is better off because of it. By now the world should know, don’t fade Mario Draghi.”

Dalio’s comments mirrored Draghi’s own words Friday. The ECB president, speaking at an event in New York, said the combination of measures “was not a package meant to address market expectations. It was meant to address the reaching of our objectives.”

The euro slipped 0.6 percent against the dollar by 4:27 p.m. New York time on Friday, to $1.0872.

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