Fund managers cut sterling exposure in 'top trade' for 2013

Fund managers and strategists have begun reducing exposure to sterling, amid fears rising inflation and the threat of a UK downgrade could derail the pound.

Investment banks are advising clients to cut their sterling allocations, with both RBS and HSBC issuing ‘trade’ notes in recent weeks. RBS currency analysts said selling sterling against the US dollar represents a top 2013 trade, given the decline in output in sectors such as financial services and extraction. “Sterling’s long-term equilibrium may be lower than current levels as a consequence. A fall in the nominal exchange rate is likely,” they said. Meanwhile, analysts at HSBC predict sterling will fall to $1.52 against the dollar by the end of this year, down 5% from its current...