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Reuters Tokyo – Hedge funds are dipping their toes back into the dollar/yen options market after months of absence, betting that eventual interest rate tightening by the U.S. Federal Reserve will help the greenback gain against the yen.
Dollar/yen’s implied volatility, a gauge of how much a currency pair is expected to move over a given period, has come down to levels not seen since before Lehman Brothers collapsed in mid-September, sending global markets into a tailspin.
The decline suggests market stress has eased substantially and investor confidence has risen after the battering dealt by the global financial crisis, but it also implies lessening demand for options to hedge against a further surge in the yen.
Bloomberg – Global Tactical Trust, a hedge fund run out of Australia by Boston-based Grantham Mayo Van Otterloo & Co., is betting the recent rally in stocks will end, and is avoiding high-risk investments.
The hedge fund that invests based on global economic trends returned 13 percent last year, when the industry posted average declines of 19 percent, by wagering against equities and backing bonds. Managed by Jason Halliwell, the fund is long the U.S. dollar, yen, U.S. Treasuries and gold, expecting them to rise, while remaining neutral on equities.
