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27 Nov, 2023 09:20

Investors speed up dollar liquidation – FT

Asset managers have been selling their positions at the fastest pace in a year this month, the outlet says
Investors speed up dollar liquidation – FT

Investors are selling US dollar positions at the fastest rate in a year as they expect lower rates next year after the US Federal Reserve ends its aggressive campaign of interest-rate hikes, the Financial Times reported on Friday.

Asset managers are poised to sell 1.6% of their open dollar positions this month, in the largest monthly outflow since last November, the outlet said, citing State Street, one of the world’s largest asset management companies.

The bank said investors have made “significant” sales daily since weaker-than-expected US jobs data was released on November 3.

“Flows in the past two weeks point to a rapid rethink with dollar demand,” said Michael Metcalfe, head of macro strategy at State Street. He added that recent greenback sales marked the unraveling of “an unusually large US [dollar] overweight” position.

“Investors think ‘if [rate cuts are] actually going to be delivered, then I don't need to hold as many dollars.’”

November marked the worst monthly performance of the American currency in a year, with experts predicting that “sales by asset managers could just be the start of a longer-term trend among investors to reduce exposure to US assets.”

According to the outlet, the weakness of the greenback plays into the hands of emerging markets as it helps them repay dollar-denominated loans and could prompt investors to flow back to developing economies after heavy sales of hard-currency debt this year.

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