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Monday, May 9, 2016

About that Currency Market Timing

I blogged Friday about the WSJ article that noted
The U.S. dollar’s weakness this year has shown the downside of hedging currency exposure when investing in overseas stocks.
Investors are taking note, pulling money out of currency-hedged exchange-traded funds after heavy buying last year, as the funds proliferated.
The rush of money into the hedged funds—and the recent movement out—is evidence that investors were chasing performance, says Ben Johnson, director of global ETF research at Morningstar Inc.
Investors “have a near-zero chance of regularly and effectively timing currency movements,” Mr. Johnson says.

Bloomberg this morning

Just when investors thought they’d finally made a good call in the currency market, the dollar’s advance messed it up.
The U.S. currency on Friday capped its best week all year versus its major peers, shortly after hedge funds finally switched to betting on dollar declines, known as going short. That’s not the only wrong move foreign-exchange managers have made this year -- an index tracking their returns shows they’ve failed to turn a profit in 2016.

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