But Stephen Jen, head of currency hedge fund SLJ Macro Partners, says it makes more sense to sell the euro when it rallies, in the belief that the knock-on effects from Cyprus will take their toll. “This saga is not likely to be over. There will be capital flight when the market opens and other complications,” Mr Jen says.
Archive for March, 2013
The Cypriot crisis, stemming essentially from a banking malaise, reminds us that Europe’s banking woes are far from over. In fact, Stephen Jen and Alexandra Dreisin at SLJ Macro Partners posit in a note on Monday that five years into the crisis, European banks have barely carried out any deleveraging. A look at their loan-to-deposit ratios (a measure of a bank’s liquidity, calculated by dividing total outstanding loans by total deposits) remain at an elevated 1.15. That’s 60 percent higher than U.S. banks which went into the crisis with a similar LTD ratio but which have since slashed it to 0.7.
Is there a currency war? Our leader line is that there isn’t but Stephen Jen, the very shrewd strategist who now runs money at SLJ Macro Partners, thinks there is – that countries are trying to “pick the pockets of each other”. Other highlights of Mr Jen’s talk
The dollar is likely to extend gains as the global economy is decoupling and the U.S. is outperforming its counterparts, said Stephen Jen, managing partner at SLJ Macro Partners LLP.
“We only see definitive signs of recovery in the U.S. and nowhere else,” Jen said at Bloomberg Link’s FX Debates in London. “In the world where growth is decoupling and the U.S. is leading the world into a recovery, the dollar will perform quite well as risk capital is attracted into the U.S. It’s very hard to short the dollar now.”
Capital Economics expects the report to show that payrolls increased 175,000 last month, with the unemployment rate holding steady at 7.9%. Should the jobs figure miss expectations, it might lead to volatile trading in currencies, given widespread uncertainty in the market about when the Fed will start to rein in its bond-buying program, known as quantitative easing, said Stephen Jen, founder of hedge fund SLJ Macro Partners in London.