Dollar vulnerable to 'crisis of confidence': Investec AM

Investec Asset Management, which runs $5.3bn in active currency funds, has warned the dollar could face a sharp correction this year due to reluctance in the US to embrace fiscal tightening.

Thanos Papasavvas, Investec AM's head of currency management, says the market is currently rewarding pro-active fiscal tightening with lower risk premiums and stronger currencies. Papasavvas highlights sterling as a prime example of this, with the pound second only to the Swiss franc in June performance. The manager says even the euro appears to have found temporary respite from market selling pressure - as most of the key players, including Germany, have introduced substantial medium-term deficit reduction programmes. Papasavvas says the US and Japan are behind the curve in terms ...