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Asian funds are shorting the euro
Multibillion sales of euro investment assets come as Asian investors have begun to lose their nerve over the European economy. In Beijing, policymakers are trying to assess how prolonged weakness of the euro will affect their plans to project the Chinese yuan as an international currency. Prominent economists in Japan, addressing an audience where hundreds of thousands of households play the international foreign exchange markets, are already describing the 1 trillion rescue package as being like a picture of a rice cake' attractive, but without nourishment. Several of Asias powerful national or sovereign' wealth funds said that currency traders in Hong Kong had started to build sizeable short' positions in the euro betting that the currency has farther to fall and hedging against the losses that they would make if previous bets on the bonds of Greece, Portugal, Spain, Ireland and Italy turned sour. However, analysts said that a decision by Kokusai Asset Management could be a critical point for the euro. Within the past few weeks the Kokusais famous Global Sovereign Open fund, which is closely followed in the market, has twice reduced the amount of euro assets that it holds in favour of what it calls more stable' investments such as Canadian dollars and Swedish kronor. In late December, the fund issued a financial vote of no confidence in Greece. Having been the largest non-governmental investor in Greek bonds in 2009, it sold its entire holding in the last few trading days of the year. The fund, which manages more than $60 billion (£41 billion), usually expects to have about a third of its money in euro-denominated bonds. That was recently reduced to just under 30 per cent and was lowered again a week later. The company has not ruled out lowering it farther still, and Tokyo foreign exchange dealers believe that it will do so tomorrow. Posted by: lotp 2010-05-20 |
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