Why the CEO of the Largest FX Hedge Fund is a Euro-Permabear

September 26, 2012 3:37 PM EDT
John Taylor, founder and CEO of the world's largest currency hedge fund FX Concepts, told Bloomberg Television he'll "probably always be a bear on the euro" and that "it is hard to look at the European situation and see a cloudy sky become clear. Much more likely that cloudy sky will start to rain on you."

The reason the euro is up, says Taylor, is because the dollar is down, and it's all thanks to Draghi and Bernanke.

"Normally equities correlate very highly with risk on and risk on correlates very highly with dollar weakness. So wanting to strengthen the equity market means you want to weaken the dollar, so therefore for those kinds of things go along with each other," said Taylor.

However, noted Taylor, "each time a QE or an Operation Twist comes along, it has less power than before."

"One of the interesting things right now is that we do believe the dollar will be weak and we have a target date of October 27 for the beginning of a reversal where the dollar might start to show strength. But I have to say the last week has shaken
my conviction in that point of view," he said.

Commenting on low FX volatility, the hedge fund manager said "It absolutely does make it harder to make money. On the other hand, would I want to go out and make a big bet? No, I am afraid of the central banks jumping down my back."

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