WEST PALM BEACH, FL (www.hedgeco.net) – Traditionally, hedge funds and other currency trading desks generally position themselves to take advantage of the traditional slide in the dollar aroundAugust. Such a slide in the dollar generally results from anticipated withdrawals from Japanese investors who repatriate their profits earned from their investments in the U.S. Treasury Bonds. Therevaluation of the Yuan by the Chinese authorities last week may impact such seasonal currency trade.
A hedge fund manager said, “It’s a big deal, the amounts involved are big, given what has happened this week, it wouldn’t surprise me if they (hedge funds generally) hadn’t already positioned themselves to short dollars against yen.” Currency experts think hedge funds may now capitalize on the Yuan�s revaluation to take advantage of the dollar�s anticipated slide against the Yen. In Thursdays trading, the dollar slipped to below 110 yen from above 113.70 yen recorded earlier in the week.
Hedge funds trading on currencies expected the dollar to rise in value against the yen. A fund administrator noted, �That the surprise decision by China to revaluate the yuan was a complete surprise, people hadn’t been expecting it for another couple of months, they’ve been caught out … they were short of yen.” According to published reports from the U.S. Commodities Futures Trading Commission, short yen positions rose during the week ending on July 12 to its highest level since 1999.
U.S. government administrators have been trying to put pressure on China to remove its artificial peg of its currency on the dollar. Currency analysts believe such artificial peg helps China to maintain an undue trade advantage against other countries resulting from the low prices of its products in the international markets.
While reactions from the U.S. government seem positive, some criticize that the Chinese government action did not go far enough. But China does not want to appear to have yielded to the pressure from the U.S. government over its actions.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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