Hedge Crunch Escalates Against Dollar

May 2, 2011 James Heinsman Hedge Fund News

In anticipation of the first ever press conference by Ben Bernanke as chair of the Federal Reserve last week, there was an escalation in hedge funds bets against the dollar to a staggering $28.6bn. This figure – released by the Commodity Futures Trading Company (CFTC) – is the largest in over a month and $3bn higher than the week before. It is said that these substantial figures suggest that the hedge funds are making their millions “from the recent collapse in the value of the greenback.” Just last Friday, the dollar dropped to a three-year low against various currencies and has indeed been falling for the last five months too. So far it is down 7.5pc this year.

Drooping Dollar

It’s not new that the dollar is dropping. Indeed, all the information we’re getting points to the fact that investors are “pulling out of the dollar” and taking on pretty much any other currency…except of course the yen from Japan that isn’t – not surprisingly – all that popular these days either. Ultimately it seems that “sentiment remains very negative against the dollar.”

As well, the dollar dropped after Bernanke’s address with his confirmation that America would maintain low interest rates and “buy back $600bn of Government bonds in a program designed to pump cash into America’s economy.”

People are nervous about inflation but Bernanke indicated that it was very unlikely that interest rates would alter at all in the next few months. In addition, GDP in America has increased 1.8pc “year on year in the first quarter of 2011,” which is a plummet from the 3.1pc development that was witnessed in the first quarter of last year.

Successful Hedge Funds

The hedge funds that are utilizing computer programs as a way of trend tracking seem to have been “the biggest winners from the dollar’s side.” Indeed, the ones use foreign exchange strategies to track trends until the programs tell them not to anymore have increased 10pc so far in 2011. Yet funds that follow macroeconomic strategies only went up 1.5pc. These days it looks like what is popular is the Euro and Pound Sterling and over $12bn was bet on a strengthening of the Euro (up 12pc from the week before).

So there is a lot going on. The dollar, the euro, the pound, the yen – up, down, up, down. World events as well as hedge crunch fund news will always have an impact on the direction of global, financial events.

Ben Bernanke, Commodity Futures Trading Company, euro, government bonds, Pound,

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