'Sell the US dollar for anything else' is echoing across trading rooms

SELL the dollar and put money into assets like emerging-market stocks and gold as the global economic recovery gathers steam, money managers say. A growing chorus of investors is betting that the greenback has reached a peak in a big turnaround from December when positioning in the dollar was the most bullish since 2015.

K2 Asset Management recommends selling the dollar for Asian emerging bonds and European stocks, while Brandywine Global Investment Management is buying commodity-linked currencies. Bleakley Advisory Group favours gold and silver. Jack McIntyre, a money manager at Brandywine has turned short on the dollar against the Aussie and Chilean peso.

The Bloomberg Dollar Spot Index slumped the most since May on Wednesday (Jan 12), tumbling 0.6 per cent, as traders sold the greenback following inflation data that was in line with market forecasts. The losses were exacerbated as funds that had looked to front-run a hawkish Federal Reserve unwound their long positions as improving global growth added to the case for value outside the US.

". . . The dollar really only rallied last year because the Fed was ahead of the Bank of Japan and European Central Bank in tightening," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. In this environment, "I still love gold and silver" as an alternative, he said.

Barings Investment Institute sees the dollar weakening against its emerging-market peers. "The dollar's slide represents a natural part of the global recovery," said Christopher Smart, chief global strategist and head of Barings Investment in Boston. "Emerging-market currencies should finally benefit from the recovery."

While dollar bears are finding their voice, others say it's too soon to write off the greenback just yet. The US currency's recent slump merely reflected investor relief that there were no hawkish surprises at Wednesday's inflation numbers and Fed chairman Jerome Powell's recent hearing, said Ilya Spivak, head of greater Asia at DailyFX.

Hedge funds also stayed bullish, and have even increased their aggregate long positions on the dollar versus a basket of 8 other major currencies for the past 3 weeks, according to data from the Commodity Futures Trading Commission. BLOOMBERG