New South Wales Treasury Corp, an Australian bond issuer, said that the move to cut dollar exposure has brought benefits and it is preparing for further weakening of the US dollar.
Stuart Brentnall, the chief investment officer of this Australian government investment management department, said that a few years ago, the department had shifted its investments to defensive currencies such as the Japanese yen, the Swiss franc and the euro, reducing the weight of the US dollar in its investment portfolio currency basket from nearly three quarters to 14%. This move has enhanced returns, and the fund currently predicts that the US dollar will fall by another 10%.
This strategy highlights how state government authorities are preparing for a long-term decline of the US dollar, betting that policy turmoil and trade uncertainties may put pressure on the dollar.
“We are not happy with 70% exposure to the US dollar,” Brentner said in an interview, adding that he believes the weakness of the dollar is a result of policy chaos in the United States. “We have changed the way we manage currencies, setting 40% of the portfolio’s exposure as unhedged – this minimizes the portfolio’s volatility and allows us to reallocate risks to assets with higher returns.”
This shift recently increased the return rate by two percentage points in the year ending June 30, with the performance of unhedged exposure outperforming hedged exposure by 7%. Bunnell ruled out any possibility of short-term active foreign exchange management, citing lower predictability and a weaker risk-return trade-off.
“I still believe that in the long run, currency won’t bring returns,” he said. “We’ll deposit short-term returns in the bank and might lose some. On the other hand, the US dollar might have been overvalued to begin with, and it might take us a few more years to lose some.”
Technical analysis:
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Gold: Yesterday, our plugin alerted that when the price retraced to the green and yellow zones, it was necessary to attempt a long position signal. Then, the price rebounded continuously and rose above the current 3540. The price movement broke the consolidation pattern of the past half year or so. After breaking through the 3500 mark, it is necessary to pay attention to the long position signal after a retracement confirmation. For detailed positions, please consult the plugin.
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The Nasdaq: Affected by poor economic data and bond market selling pressure, the Nasdaq retreated below 23,000 overnight. However, it later stabilized and rebounded. The expectation of future Fed rate cuts provides some support to the price. Today, we continue to pair breakaway pullback buys and low-sweep liquidity buys. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: Yesterday, the price probed into the yellow zone as alerted by our plugin, completed the liquidity sweep action, and then started a strong rebound trend. However, the price has not yet refreshed the new high, so for today, we will continue to maintain a low-buy strategy and wait. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Key economic data and events to focus on today:
15:55 Germany’s August Services Purchasing Managers’ Index (PMI) Final Reading
16:30 UK August Services Purchasing Managers’ Index
17:00 Eurozone Producer Price Index (Year-on-Year) for July
At 21:00, James Bullard, President of the Federal Reserve Bank of St. Louis, will deliver a speech on the U.S. economy and monetary policy.
22:00 US July Durable Goods Orders Revised (MoM)
22:00 U.S. July JOLTs Job Openings (in 10,000s)
