Goldman Sachs Fund Manager Says Dollar Pain Trade Is Flashing a Buy Sign

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Just as the biggest rout for the dollar in at least six years is sending investors fleeing, at least one observer says it’s time for value-oriented money managers to start piling in.

That’s the view of Mike Swell, co-head of global fixed-income portfolio management at Goldman Sachs Asset Management. 

“The biggest pain trade, no question, has been the dollar,” Swell said in an interview on Bloomberg TV. “You really have to look at the fundamentals and step back from geopolitical risk, political risk in the U.S., weaker inflation over the course of the last few months, and really look at what’s going on from the economic perspective” in the U.S., he added. “The dollar is very, very attractive right now.”

The U.S. currency weakened past the key $1.20 per euro level for the first time since January 2015 Tuesday. Its slump has been fueled in part by lackluster economic data and sinking confidence in the Trump administration’s ability to carry out pro-growth policies. The 9 percent rout has prompted speculators to bail on long bets, sending net bearish wagers to the highest since 2013 this month. Money managers in an August Bank of America survey labeled the short-dollar trade the second-most overcrowded bet across markets.

The dollar gained 0.2 percent to $1.1946 per euro as of 9:15 a.m. in London, after touching $1.2070 Tuesday, its weakest level since January 2015. It rose 0.3 percent to 110.01 yen, having reached a two-week high of 110.17.

“The fundamentals lie in the U.S., where you have stronger growth, and you have the potential for tax policy change, which can make a big difference,” Swell said. “At this point, from a dollar perspective, it makes sense to start really considering getting long the dollar, particularly relative to some of the other developed-market country currencies.”

— With assistance by Jonathan Ferro, Alix Steel, and John Ainger

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