How to Ride the Risk-On Wave
The prospect of low interest rates through 2014 has currency investors looking for risk-on investments. Here's one strategist's plan.
When the Federal Reserve vowed to keep interest rates low through 2014, currency investors had a knee-jerk reaction: it's time to buy risk.
"The Fed has list a Bunson burner under high-yielding assets," says Willie Williams, directors of institutional derivative sales at Societe Generale. And fourth-quarter GDP at a lower-than-expected 2.8 percent points to the need for more stimulus.
Williams told CNBC's Scott Wapner that the new mood, and the Fed's apparent determination to spur economic growth, are leading him to recommend selling the Australian dollar against the Mexican peso.
"We are moving toward higher yielding assets, and I'd prefer to have exposure to those with more exposure to the U.S. than to Europe or Asia at the moment," he says.
Williams wants to sell the Aussie dollar against the Mexican peso at 13.75 with a stop at 13.95 and a target of 13.00.
Still, in the very near term, he does think the euro could hit even higher levels. Investors are still hold large short euro positions, he says, increasing the chance of a short squeeze, and on a technical level, "a break of 1.3210 could send it higher."
You can watch the discussion on the videoclip.
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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