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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
“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.”<\/p>\n
Consequently the euro slipped against the yen, which also pushed the dollar down against the Japanese currency and hedge funds got their fingers burned.<\/p>\n