(Bloomberg) — The Federal Reserve may have telegraphed a higher peak for US interest rates, but at least one investor expects it to be more cautious about tightening from here.
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M&G Investments, which has been reducing long greenback bets, reckons the Fed is entering the “second phase” of its hiking cycle. The new chapter sees the US central bank taking into account its recent rate increases and the lags with which monetary policy affects economic activity.
“While the Fed remains data dependent and committed to fighting inflation, it is likely to exert more caution with interest-rate increases going forward,” said Pierre Chartres, fixed-income investment director in Singapore. “We have been reducing our USD exposure for funds that take FX risks and also gradually adding back US duration over time.”
The dollar has been on a tear this year as the Fed jacked up interest rates aggressively, but its fate…
