A Different Way To Play A Rate Hike

New York (HedgeCo.Net) Rather than betting on bonds going down when the Fed finally raises interest rates, a recent article from CNBC suggests that hedge funds are making their bets in the currency markets.

According to the article, such heavyweight firms as Bridgewater Associates, Tudor Investment, Moore Capital and Brevan Howard have considerable assets allocated to a currency trade scenario.

When the Fed does finally raise rates, the U.S. dollar should gain in value against the other currencies of the world, but the ones that should be particularly weak are the currencies of countries or areas where their central bank is lowering rates or injecting capital in order to stimulate the economy. With the European Central Bank introducing their version of quantitative easing recently and the Bank of Japan taking similar action, the Euro and the Yen could be susceptible.

The CNBC article states that the most popular trade is being long the dollar and short the Euro.


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