In this article, let's take a look at one of the most important financial variables in the world, the dollar, following the bet against that currency by Charlie Chan, a former Credit Suisse Group AG proprietary trader, who now runs his own hedge fund.
According to Bloomberg, Mr. Chan said his Splendid Asia Macro Fund has returned more than 8% this year, adding to its 18% gain in 2014. So, let´s take a look at his opinions and moves.
The hedge fund manager is speculating on gaining from a decline in the dollar value. Mr. Chan said he cut his long dollar position against the yen last week after the escalation of the greenback stalled. He obtained gains of more than 10% in each of the last three years. Specifically, this guru is now betting that the dollar will weaken against Asian currencies like: Singapore dollar, the South Korean won and Indian rupee. So he is clearly optimistic on that continent.
Since mid 2014, we can see an upward trend in the U.S. Dollar Index, which is an index of the value of the dollar relative to a basket of foreign currencies: Euro (EUR), Japanese yen (JPY), Pound sterling (GBP), Canadian dollar (CAD), Swedish krona (SEK) and Swiss franc (CHF).
At the start of 2015, Ray Dalio (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and Alan Howard have benefited from the rise of the U.S. dollar against other major currencies.
Charlie Chan predicts that the yen will decline to as low as 118. “The yen has weakened quite a lot and Japan has eased quite a lot. … So, it’s probably time to let all this easing work its way through the market. I’ve always held the view the dollar wouldn’t go much beyond 120.”
When thinking about betting on currencies or in the stock market, there are many opinions; some specialized in currencies, others do in stock. This doesn´t seem to be the case with Mr. Chan, who invests in bonds, currencies and stocks in Asia.
Final comment
While we are expecting a greater volatility over the upcoming year because we don’t know exactly when the Fed will raise interest rates, we expect to see the dollar strengthen to consolidate in the markets.
Although my track record as an investor is not at all comparable to Charlie Chan, in this opportunity I would not follow him and I recommend betting on the dollar.
Disclosure: As of this writing, Omar Venerio did not hold a position in any of the aforementioned stocks, funds or currencies.
