Fund managers for Asia’s wealthiest families are looking elsewhere for returns after chasing the US dollar’s gains in the past three years.
That’s because the dollar’s gains are expected to slow in coming months after the Federal Reserve committed to a gradual pace of tightening, Bloomberg said.
The currency will appreciate about 5 percent to US$1.05 per euro by the third quarter of 2016, according to a Bloomberg survey, after surging 10 percent this year.
James Purcell, a strategist at UBS Group AG’s wealth management business in Hong Kong, said there’s “little room for further dollar appreciation”.
Stephen Diggle, who runs Vulpes Investment Management in Singapore, said US rate increases aren’t enough “to chase a strong dollar”.
Stamford Management Pte, which oversees US$250 million for Asia’s rich, will review its outlook for greenback gains after expected advances in the first quarter, its chief executive Jason Wang said.
The dollar’s advance against the Japanese currency will be limited to less than 4 percent to 125 yen, after gains slowed to about 0.6 percent in 2015, from more than 10 percent in each of the previous three years.
“Our clients will likely see the increase in US interest rates as an opportunity to earn higher yields on the their assets by shifting into dollars,” Purcell said.
However, he reminded investors that that “financial markets move on surprises, not absolutes. The increase in rates was extremely well telegraphed and the rate-divergence story well known”.
The yen may be a better cross to express a strong dollar view than the euro, Purcell added.
UBS expects the dollar to be little changed at US$1.08 per euro in six months and to rise to 127 yen, he said. The greenback was at US$1.0976 versus the common currency as of 4:30 p.m. in Singapore on Monday and at 120.53 yen.
The dollar’s gains are already losing steam in parts of Asia, with the Indonesian rupiah rallying 7.3 percent in the fourth quarter, the Malaysian ringgit 2.3 percent and the Singapore dollar 1.1 percent.
A gauge of the greenback is heading for 1.2 percent advance this quarter and an 8.6 percent gain this year, after an 11 percent surge in 2014.
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