George Soros Is Going After The Two Most Hated Currencies In The World

George Soros

Photo: AP

The two most hated currencies in the world right now are: The Japanese Yen and The British Pound.

In the case of the yen, the new Prime Minister Shinzo Abe has come into power with an aggressive easing agenda (both monetary and fiscal). The yen has been getting slaughtered since November.

In the case of the British pound (which has been getting hammered all year) the currency is weakening on a combination of weak economic prospects, a worsening balance of trade, and the expectation that newly incoming Bank of England chief Mark Carney will be inclined to ease policy further.

And George Soros is apparently going after both currencies.

The FT’s Sam Jones reports:

Ask some of the world’s biggest hedge funds where they are watching for the next big shift in global markets and many will point to the same place: sterling.  Having made billions successfully shorting the yen since November, top global macro traders – funds such as Soros Fund Management, Tudor Investment Corporation, Caxton Associates and Moore Capital – are increasingly looking at the pound.

It’s unclear what “increasingly looking” at means, in terms of where they are in the trade process.

But yes, as noted above, Soros is also making a fortune on the declining yen, with his firm having tallied $1 billion in profits on the declining currency, according to reports.

As an aside, there’s a piece up at The Guardian about the Pound losing its safe-haven status.

But this isn’t entirely accurate. A decline in a currency, even a sharp one, doesn’t say anything about its role as a safe haven or not. All around the world, a lot of crisis trades are being unwound (safe havens everywhere are falling) and so a drop in the Pound is entirely consistent with being a safe haven. Furthermore, the drop in the pound is a natural response to both economics and policy, not about some loss of confidence in the durability of the currency itself.

One last point, Soros shorting the pound of course has symbolic interest, because he famously “broke” the Bank of England” by shorting the pound in 1992, when it was pegged to an unsustainable fixed exchanged rate. This is nothing like that. The BoE isn’t trying to defend the pound in any sense at this point, and a decline in the currency is not a problem.

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