Is the dollar next? Investors reassess after Swiss shock

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By Rachel Evans and Lananh Nguyen
Bloomberg News
Wednesday, January 21, 2015

After Switzerland shocked markets by scrapping its currency cap, investors are beginning to ask whether a policy surprise may be lurking for the dollar too.

Samson Capital Advisors LLC said the Swiss move, which sent the franc surging as much as 41 percent against the euro last week, was "a good reminder" of the risks of following the herd, just as speculators pushed bets on a dollar rally to a new high. A shock from the Federal Reserve, such as raising interest rates less quickly than investors expect, may derail the greenback after it advanced to the highest in a decade, State Street Global Advisors Inc. warned.

"People have to be re-assessing what their positions are," Jonathan Lewis, chief investment officer at New York-based Samson, which has $7.4 billion in assets, said by phone on Jan. 16. In the case of Switzerland, "people were betting billions of dollars on the kindness of strangers, people they'd never met, whose names they couldn't pronounce."

Bloomberg's Dollar Spot Index -- which tracks the U.S. currency against the euro, yen and eight others -- is headed for a seventh straight monthly advance on the assumption the Fed will raise its zero to 0.25 percent benchmark rate in coming months. At the same time, traders expect Europe and Japan to debase their currencies by flooding markets with more cash.

Only now, after being shocked by the Swiss National Bank, some investors are asking: What if we're wrong? ...

... For the remainder of the report:

http://www.bloomberg.com/news/2015-01-21/is-dollar-next-investors-reasse...



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