Nomura: Now’s not the time to bet on the dollar

Nomura just neutralized its exposure to the dollar.

Jens Nordvig, managing director of currency research at Nomura Holdings Inc., closed out a bet the dollar will strengthen against the yen USDJPY, -0.23% with a slight profit, and another bet that it would strengthen against the euro EURUSD, -0.2200% , with a small loss.

Nordvig said that the Federal Reserve’s latest projections cast doubt on the likelihood of a rate-hike in September.

According to the latest “dot plot,” an illustration of policy makers’ rate-hike expectations, only five members of the Fed’s rate-setting committee expect the central banks to raise rates twice this year, down from seven in March.

And the implied pace of rate hikes has slowed to below four rate hikes between year end 2015 and year-end 2016, Nordvig said.

Also read: ‘Dot plot’ points to big divide at the Fed

Because of this, the future course of rates will be entirely based on the strength of U.S. economic data, making the dollar’s movements in the near term less predictable.

Uncertainty is also a problem for the euro, as the correlation between Greek news and movements in the common currency appear to have broken down.

“We will watch the news around Greece and U.S. data closely in coming weeks, before initiating fresh exposures,” he said.

Nordvig said that Japanese policy makers likely don’t want the yen to weaken rapidly, but would probably tolerate a more gradual depreciation. But the dollar’s muted reaction to Bank of Japan Gov. Haruhiko Kuroda’s comments from Tuesday — when he walked back an earlier statement that the yen was unlikely to weaken further — suggests the dollar-yen pair will move in a tight range in the short term