Credit Suisse Builds Bets on Dollar Gains Versus Yen and Euro

  • Dollar set to strengthen to $1.05 per euro, 118 yen: Parker
  • `Anything below 110 yen is attractive to buy the dollar'

Credit Suisse Group AG’s asset-management business is building positions that seek to profit from gains in the dollar versus the euro and yen as the Federal Reserve is set to raise interest rates again starting in the third quarter.

The dollar is poised to strengthen toward $1.05 against the euro and 118 yen as the Fed’s policy diverges from its peers and widens the yield differentials, said Robert Parker, a London-based senior adviser for investment strategy and research at Credit Suisse.

The greenback weakened in the first quarter as traders pushed back forecasts for when the Fed will raise interest rates due to heightened global risks. The central bank is set to raise rates “more rapidly” in 2017 as U.S. wage growth accelerates, Parker said.

“You’ve got to be long the dollar at the moment,” Parker said in an interview at the Credit Suisse Megatrends Conference 2016 in Singapore. “It’s more of a trading position rather than a structural long-term position because the big moves are largely behind us.”

‘Line in the Sand’

The euro is unlikely to rise above $1.15 at least over the next 12 months as a stronger single currency would hurt the European economy, Parker said. The European Central Bank, which holds its monetary-policy meeting Thursday, cut rates in March and increased bond purchases by a third to 80 billion euros ($90 billion) a month.

“The ECB has got a line in the sand of about $1.15,” he said.

The dollar has strengthened 0.8 percent against the euro this month following a 4.6 percent slide in the first quarter. The greenback was little changed at $1.1290 per euro and fell 0.2 percent to 109.67 yen as of 9:38 a.m. in London.

Japanese officials are set to talk the yen down or intervene to weaken the currency if it appreciates toward 107 per dollar again, Parker said. The yen is unlikely to weaken past 118 because of Japan’s current-account surplus, he said. The currency is still 24 percent undervalued, according to a Bloomberg measure of purchasing power parity based on consumer prices.

Yen Trade

Against the Japanese currency, the greenback has advanced 0.9 percent this week amid speculation the Bank of Japan may expand stimulus at next week’s monetary policy meeting. The dollar tumbled 9.5 percent this year through April 15.

BOJ Governor Haruhiko Kuroda’s concerns about a rising yen are shared by senior officials at the central bank, according to people familiar with the discussions. Worries about the potential impact on inflation from a strengthening exchange rate are escalating at the BOJ ahead of an April 28 policy decision, according to the people, who asked not to be named as the talks are private.

“We were long the yen,” Parker said. “Now we have reduced risk and are buying dollars. Anything below 110 yen is attractive to buy the dollar.”

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