Most Hedge Funds Quickly Launched The Hedging Investment Arbitrage Mode.

After the referendum broke out in Europe, most hedge funds quickly launched the hedging investment arbitrage mode. The investment in the traditional hedge currencies such as the US dollar, Japanese yen and Swiss Franc increased to more than 70%. Even some radical parties have invested more than 80% in the three major hedge investment currencies.

The ECB's announcement of the June monetary policy meeting showed that the referendum of Britain's withdrawal from Europe could have a significant negative impact on Trade and financial markets and spread to the euro area.

Prior to the Fed's June monetary policy meeting minutes also showed that most of the Fed executives believe that we should be cautious waiting for the outcome of the British referendum.

Federal Reserve Chairman Yellen even stated that before the Fed tightened its monetary policy further, it was first necessary to be convinced that Britain's departure from Europe would not have a negative impact on global economic development.

"In fact, the wording of the minutes of the June meeting of the European Central Bank and the Federal Reserve has set the tone for foreign investment in the second half of the year, that is, risk investment will dominate the financial market volatility in the coming period."

A European hedge fund manager told the 21 media reporters that he understood that after the British referendum broke off Europe, most hedge funds quickly launched the hedging investment arbitrage mode. The investment in the traditional hedge currencies such as the US dollar, Japanese yen and Swiss Franc increased to more than 70%, even though some radical parties had invested more than 80% in the three major hedge investment currencies.

Risk aversion will also affect the future trend of foreign exchange market.

Andres Jaime, a strategist at Barclays, told the 21 media reporters that because the financial market has not yet fully digested the political risk and economic development uncertainty of the British derivative EU, the euro dollar exchange rate will be lowered to 0.85 from the original 1 in the next 12 months.

The yen has been favored by hedge funds, and the US dollar to the yen exchange rate will fall further from 83 to 83 in the next 12 months. In addition, the prevailing market consensus is that the pound, which is deep in Britain's Euro vortex, will also fall.

"In fact, the bad debt crisis between Britain and Europe has pushed the whole of Europe to a new dangerous edge. What the capital market can do now is to find a safe haven as soon as possible."

Andres Jaime blunt.

Compared with the yen, dollar, Swiss franc and other hedge currencies continue to be favored, the British pound and euro, which are deep in the British vortex, are becoming outcast in the financial market.

According to the latest report of Deutsche Bank, although the British pound has fallen by about 15% against the US dollar, the pound's decline has only just begun. At the end of the year, the pound could reach 1.15 against the US dollar, which is about 10% lower than the current exchange rate.

Citibank even believes that the United Kingdom off Europe will inevitably lead to the Bank of England further cut interest rates, so that the pound against the dollar may reach 1.2. at the end of the year.

"This is a more conservative estimate."

George Saravelos, a foreign exchange trader at Deutsche Bank, believes that the global hedge fund is discussing how big the bad debt crisis in Europe and Europe will be.

Whether it will trigger a new round of the European financial crisis, eventually the pound fell to 1 to 1. against the dollar. In his view, the next round of the pound's downtrend is likely to occur after this week's interest rate meeting of the Bank of England, because most institutions expect the Bank of England to cut interest rates by 25 basis points to stimulate economic growth.

"In fact, most financial institutions believe that the Bank of England cut interest rates by 25 basis points, which is not enough to offset the slowdown in economic growth brought about by Britain."

Jeremy Stretch, head of CIBC foreign exchange strategy, told the 21 media reporters.

It should be noted that the market effect produced by the interest rate cut by the Bank of England is quite different from that before the European Central Bank's interest rate cut. In March, the ECB cut interest rate could cause the euro exchange rate to rebound. The main reason was that the European Central Bank did not have more room to cut interest rates. At present, the benchmark interest rate of the Bank of England is 0.5%. Even if the rate is cut by 25 basis points, the market also believes that Britain may have further interest rate cuts, which will further expand the interest rate differential of the pound against the US dollar, which will make the pound bear additional capital outflow pressure.

"As the Bank of England cuts interest rates may weaken the pound exchange rate trend, we are beginning to estimate the second round of weakness in sterling."

Robin Brooks, chief foreign exchange strategist at Goldman Sachs, pointed out.

Goldman Sachs expects the pound against the dollar in the next 3 months, 6 months and 12 months for 1.20,1.21 and 1.25., respectively.

As the pound continues to slack, the euro will also be implicated.

Andres Jaime told the 21 media reporters that the current market has not yet fully digested a series of political risks and economic development uncertainties derived from the United Kingdom, and the European bank's bad debt crisis has continued to ferment, resulting in greater devaluation pressure on the euro.

He has further lowered the euro to us dollar exchange rate from the original 1 to 0.85. in the next 12 months.

The dollar is rising enough.

"At present

The main reason is that they are willing to continue to pursue the Treasury bonds whose yields have fallen into negative value, mainly because they think the yen, the US dollar and the Swiss Franc will appreciate, and the appreciation will be enough to offset the losses caused by the purchase of the debt.

David Kohl, head of foreign exchange research at Baosheng Group, Switzerland, analyzed the exchange rate valuation of yen, US dollar and Swiss Franc in an interview with 21 media reporters.

Andres Jaime, a strategist at Barclays, told reporters that most hedge funds believe that the US dollar exchange rate is likely to fall short of 95 in the short run, while the US dollar index may also rise from the current 96 jump to 98.

However, how long can the yen and the US dollar exchange rate rise, as well as their respective policy constraints.

Reporters have learned that the current pressure on the yen exchange rate to increase pressure is the intervention of the Bank of Japan, and the US Federal Reserve may postpone interest rates or even cut interest rates in the UK after its withdrawal from Europe.

"However, these policy factors will not affect the popularity of the yen dollar as a hedge currency."

Andres Jaime pointed out to 21 media reporters that at present, the global financial market seems to have a risk averse asset shortage. Most hedge funds suddenly find that there are almost no other reliable investment targets except Japanese yen, US dollar, Swiss franc and gold. This is bound to force global capital to scramble for these hedge currencies.

He cautioned that he was more optimistic about the future of the US dollar than the yen.

The reason is that the reason why the United Kingdom has triggered the rapid rise of the yen exchange rate is that the global investment institutions have been deleveraging based on the global economic slowdown, that is, they no longer borrow large amounts of Japanese yen from the banks, and leverage the Japanese yen arbitrage pactions, which leads to the continuous return of the yen to Japan, which has made the yen exchange rate rise rapidly.

However, how long the yen reflux can be triggered by this deleveraging is unknown, which makes it possible for the yen to rise.

In contrast, the US dollar has benefited from sustained sustained growth in the US economy and the Fed's rate hike expectations. The basis for the continued rise in the exchange rate in the future is rather more robust. David Kohl bluntly, based on the economic shock caused by the referendum in Britain, will also be puzzling the world for weeks or even months. Compared with the yen as a hedge asset, the US dollar market demand has not yet been fully demonstrated.

The dollar is likely to reverse in the next few months and become the most popular hedge currency.