Halister News

(Bloomberg) -- The greenback will probably come under renewed pressure in the coming months, says Brendan Murphy, managing director of global and multi-sector strategies at Standish Mellon Asset Management Co., which oversees $155 billion.

• “The dollar should be weaker versus the euro, versus EM currencies, and pretty much across the board,” he says
  • Started the year with a tactical short on USD; recently reduced those bets and is looking to add bearish positions
• Expects Fed to raise rates in December, plus 2 to 3 times in 2018
• Sees UST 10Y yield rising to 2.5% to 2.75% range next year
  • “We like TIPS,” Murphy says. “Inflation protection is cheap, we’re avoiding the long end, we like the intermediate-duration part of the curve. We think there’s room for the curve to steepen.”
  • Underweight positions in core-Europe bonds
• “Inflation is my biggest concern,” he says; investors are complacent about volatility even though synchronized global growth, improving labor markets and accommodative monetary policy may spur inflation
  • If central banks need to slam on the breaks, that would be “disruptive” and fan volatility in FX markets
  • Cheap yen call options are good protection against this scenario because the currency would benefit from haven demand; looking at 6-month USD puts, JPY calls and selling on upside of CAD puts, JPY calls
• Attractive EM currencies include Argentine peso, Mexican peso, Turkish lira and Polish zloty, Murphy says

To contact the reporter on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net Mark Tannenbaum