"How Hedge Funds Are Trading the ECB’s Moves"
From MoneyBeat:
The euro’s strength over the past two years–seemingly in contrast to
the bloc’s stuttering economy–has baffled hedge funds and other
investors alike. But that may be about to end. Thursday’s package of stimulus measures from the European Central Bank
has pleased some hedge funds, who think the single currency could
finally be peaking. Managers also think that the bank’s actions could be
good for so-called risk assets–stocks and bonds. To be fair, the euro was stubbornly resilient in the face of ECB President Mario Draghi‘s
measures, but it has driven lower since he began promising action last
month and at $1.364 today against the dollar it remains below it’s
year-to-date peak of $1.399, hit on May 8.
Aaron Smith, managing director of Pecora Capital in Switzerland, which rose 14.2% last year:
“There’s definitely an opportunity from a trading perspective… U.S.
interest rates will start to pick up and euro rates will stay low or go
lower. That’s bearish for the euro and bullish for the dollar.”
He has shorted the euro and the yen and bought gold futures. “Gold
becomes relatively more attractive as interest rates fall in Europe.
What’s the point in sitting in euros earning nothing? The euro at $1.35
can potentially come off much further. It looks like a new trend is
emerging.”
Philippe Gougenheim, CEO of Swiss-based Gougenheim
Investments which runs $50 million and whose portfolios are up 22% so
far this year:
“We’ll probably not see $1.39 or $1.40 again (in the euro)… I don’t
know what will be the bottom, but I’m quite confident we’ll not see
$1.40. I’m short euro/dollar… I’ve been selling December maturity calls
on euro/dollar.
“I was long the Dax and I took profits above 10,000 [which it hit
today, as Mr. Draghi was revealing his measures]. This was good for risk
assets, but it’s not easy to buy before the (U.S.) unemployment figure
tomorrow. We’ll probably re-enter our long position.”
A manager at a hedge fund firm running more than $8 billion in assets, who asked not to be named:
“This is definitely good news for risk assets. They’re trying to
improve the supply of credit to improve lending in the real economy…
This was positive. The ECB is coming good in doing whatever it takes…
It’s positive for credit portfolios....MORE
