Reuters – Hedge funds were caught off-guard by the dollar’s recent lurch lower versus the yen and much like last year may struggle with the currency pair in 2006, industry analysts said.
That, however, mainly applies to global macro funds, which make directional bets on currency, bond, commodities and stock markets, normally on the basis of economic trends.
The yen has gained more than 3.5 percent versus the dollar so far this year — it was trading around 113.60 on Thursday — as investors prepare for Japan to end its super-loose monetary policy stance and a pause in the U.S. Federal Reserve’s 18-month rate tightening cycle.
“Macro funds were caught out by the dollar’s fall against the yen in early January,” a hedge fund analyst said. “(European bond) coupon payments being taken home by Japanese investors was probably the trigger.”
Consequently the euro slipped against the yen, which also pushed the dollar down against the Japanese currency and hedge funds got their fingers burned.
