$1 Trillion Manager Hangs Tough With Bullish Call for Dollar

  • Amundi’s Kwok expects the Fed to raise rates in coming months
  • Eaton Vance has trimmed its bullish dollar positions: Stein

Will We See a Greenback Comeback?

Amundi SA, which manages about $1 trillion, is holding on to its bullish dollar wagers even as sentiment turns against the U.S. currency.

The asset manager is seeking refuge in the greenback, a traditional haven in times of market stress, before the U.K. votes June 23 on whether to remain in the European Union. The dollar climbed against the pound and volatility surged on Monday after polls showed more Britons favored quitting the EU.

Amundi is also sticking with its projection that U.S. policy makers will raise interest rates in the coming months, unlike futures traders who are betting the Federal Reserve will wait till December after weaker-than-forecast jobs data last week. Fed Chair Janet Yellen said Monday the economy was making progress, while remaining silent on the timing of monetary tightening.

“We do not overreact to a few data or a few comments from the Fed,” said James Kwok, head of currency management at Amundi in London. “The long dollar position is also good ahead of the U.K. referendum.”

Trimming Position

Not all are as sanguine. Eaton Vance Corp., which oversees more than $300 billion, has trimmed its bullish dollar positions, including against the yen and euro, in one of its funds over the past year, said Eric Stein, its Boston-based co-director of global fixed income. The U.S. currency has tumbled 11 percent against the yen and 4.5 percent versus the euro this year. Its biggest long dollar position is currently against the offshore Chinese yuan, he said.

As Brexit risks become more imminent, traders around the world are preparing for the decision. An online poll by YouGov Plc published in Tuesday’s Times newspaper showed “Remain” at 43 percent and “Leave” at 42 percent. The pound fell on Monday when a survey published by the same pollster had “Leave” in the lead at 45 percent and “Remain” at 41 percent.

“We are still modestly long the dollar against some currencies, but not nearly as big as a year or two ago given the broad dollar valuation as well as the back and forth rhetoric of the Fed,” Stein said. ”Even though markets are pricing in a very low likelihood of a July hike by the Fed, I think it is still very much on the table if the Remain vote wins in the U.K. and the data ticks up a notch in the U.S.”

Rate Outlook

A gauge of the dollar has slid about 2 percent in the past week as investors added to bets that U.S. rates will stay lower for longer. The losses follow a 3.7 percent rally in May, when policy makers including Yellen said higher rates in the coming months look appropriate.

Traders see a zero chance the Fed will raise interest rates by its June 14-15 meeting, down from 24 percent odds a week ago, futures contracts indicate. The probability of an increase next month was at 18 percent, declining from 55 percent before Friday’s jobs data.

“The dollar will gain ground against sterling in the run up to Brexit if the polls remain narrow ahead of the vote,” said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc. “The greenback also will benefit against the euro on concerns that a U.K. vote to leave the EU would spark demands for similar referendums in Eurozone member states.”

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