Don't look now, but the rally in risk-sensitive currencies could be sputtering.
It's only September, but a number of FX investors have reached their year-end targets on key positions, according to new research from Bank of America Merrill Lynch .
In a survey of 83 fund managers conducted between September 7 and September 12, even before the post-QE3 rally, "over half of the investors (60%) were looking for S&P 500 to close above 1400 at year-end while the majority of investors (68%) expected EUR/USD to be between 1.20 and 1.30," the strategists say.
That's great news if you are one of the lucky players holding a winning position. But if you're looking to get into a new bullish trade, be careful.
Fund managers' net exposure to the euro is already up six points from a month ago - and their net exposure to emerging-market currencies has increased 20 points. That means these investors have less room to increase their positions. In any case, if they have reached their targets, they may instead be looking to lock in some gains.
There is more. The BofA Merrill Lynch strategists warn that "investors should remain alert as the sustainability of the rally depends on the US addressing its fiscal problems and Spain and Italy implementing reforms" - the fund managers' most pressing concerns.
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