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Activist Investor Bill Ackman Bets on the Hong Kong Dollar, But Should You?

Monday, 19 Sep 2011 | 8:40 AM ET
Hong Kong Dollar bills featuring an image of the Bank of China Building. There are growing calls for an end to the peg with the U.S. dollar.
Tim Graham | Getty Images
Hong Kong Dollar bills featuring an image of the Bank of China Building. There are growing calls for an end to the peg with the U.S. dollar.

The Hong Kong dollar has been in the spotlight since investor Bill Ackman announced he had taken a big long position in the currency. Whether you should is another matter.

The euro has been in everyone's sights for so long that it was almost a relief when activist investor Bill Ackman announced he was taking a big long position in the Hong Kong dollar. And of course the obvious question is then whether this makes sense for average investors too.

Ackman is arguing that the Federal Reserve is likely to push interest rates down even further, and because that policy doesn't work in Hong Kong's high growth-high inflation economy, they will let their currency float against the greenback and it will rise.

Ackman Long on Hong Kong
Bill Ackman is betting the Hong Kong dollar will appreciate. Does that mean you should, too, with CNBC's Melissa Lee and the Money In Motion traders. Also, how to manage a currency trade that's not working out. On August 26th, Andy Busch recommended a bullish bet on the Mexican peso. It has since fallen to a 1-year low vs. the dollar.

But "Bill could be wrong," at least short term, says Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional. "The Hong Kong dollar is primarily a Chinese currency now, and China likes the stability. The peg has been there since 1972 and it's been there for a reason," she told CNBC's Melissa Lee.

Ackman's trade could ultimately work out, Patterson says, "but it's not a trade I would suggest for average investors."

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.

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