Jupiter strategic bond fund manager Ariel Bezalel has introduced dollar currency exposure to the fund as he feels sterling has further to fall.
The £447m fund has taken an 8 per cent position in US dollars. This is only the second time it has taken currency bets.
Bezalel says: “There is more downside to be had in sterling as the Bank of England comes round to quantitative easing, putting more pressure on sterling. The UK outside of London is in recession and I fear London will get there as well.”
Bezalel says as half of the UK’s exports go to Europe, Britain will feel the pinch as the European crisis continues. He adds that UK consumers are already suffering high inflation and low income growth.
If the volatility in Europe continues, Bezalel will further increase his dollar exposure.
JP Morgan international chief investment officer of fixed income Nick Gartside sold down the 10 per cent emerging market currency exposure in the £80.8m strategic bond earlier this year and put part of it in dollar exposure.
Gartside says: “We were concerned about a flare-up of risk and emerging market foreign exchange is very sensitive to risk. Dollar is the real beneficiary in any environment where you have risk-aversion. In that environment, you can expect the dollar to perform strongly.”
Dennehy Weller & Co managing director Brian Dennehy says: “In extremes, it is the US dollar and short-dated US treasuries that are the safe havens. In the sort of environment we are in now, we are likely to see dollar strength particularly versus the euro.
“I would be comfortable with a bond manager heavily increasing dollar exposure.”