WEST PALM BEACH, FL (HEDGECO.NET) – The decline of the US dollar has revitalized hedge funds as volatility in the currency markets has helped hedge funds to increase their trading activities.Volatility had all but dried up during much of 2004. Market experts think hedge fund mediocre performance in 2004 is also partly related to the lack of movements in the global markets.
The growing US current account deficit along with worries over the continued growth of the US economy has helped to stimulate new declines for the dollar. Some market analysts believe the perception that the Bush Administration may tolerate a weaker US dollar has also helped to push the dollar to lower levels. It is perceived that a weaker dollar will make the US products cheaper overseas and may help to reduce the growing US trade deficit.
The woes of the dollar have helped some hedge funds, particularly the managed futures strategies to post positive returns in October. According to latest hedge fund tracking data from the Credit Suisse First Boston/Tremont Hedge Fund Index, the managed futures strategies gained 4.28 percent in October. Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York said, “Now that markets are trending and no longer consolidating, the potential to earn what they call ‘alpha’ (pure return) has increased and so hedge funds are heavily positioned in currencies.�
Franulovich added, �as soon as the euro broke (above) $1.2450, — that was the level that kept the euro on the topside for four to five months — we had a lot of pent-up demand to get on board the (dollar) downtrend.�
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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