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SCMP Reporter

CURRENCY experts claim the battered US greenback is to make a comeback against the yen - offering profitable opportunities for investors.

  But estimates about the size of the rally vary widely with some believing the dollar will be struggling to claw back from its near-record lows, while others anticipated a surge of about 15 per cent during the next 12 months.

  Jardine Fleming launched a 'guaranteed' fund last week, offering to more than double any appreciation the US dollar makes against the Japanese yen in the year to July 10, 1996.

  But other funds, such as the flagship Guinness Flight currency fund, have reduced their exposure to the US dollar by about five per cent recently.

  US dollar bulls said the currency's 20 per cent decline against the yen over the past year - 200 per cent over a decade - would soon be arrested.

   This was despite last week's fall following US Federal Reserve Board chairman Alan Greenspan's hint that US interest rates might be cut.

   US dollar bears said the current trade dispute would continue to undermine any prospects for significant appreciation. Investors considering a currency investment have several alternatives for taking advantage of rallies.

   Cynthia Lau, director of investment services for Jardine Fleming Unit Trusts, said: 'We believe the US dollar is fundamentally undervalued and could present one of the better buying opportunities for this year.'   The Jardine Guaranteed Currency Trust guarantees 210 per cent of any appreciation in the US dollar for an investor who remains in the fund until July 10, 1996.

  It will also underwrite 95 per cent of the investors' capital - less charges - against any loss if the dollar continues to fall.

  There is an initial charge of three per cent, an annual charge of 1.35 per cent and a two per cent early redemption fee.

   The 210 per cent return is achieved by a swap agreement - a transaction involving two parties which exchange different types of return - between the trust and London's Robert Fleming banking group.

   Robert Fleming also guaranteed a bid price of US$9.50 at the end of the one year-term.

   This means that on July 10 next year a 20 per cent rally in the dollar would mean a gain of $37,000 - less charges - for an investor who places $100,000 in the fund.

   If the US dollar was to fall 20 per cent against the yen then the loss for the same investor would be capped at five per cent, less charges.

   Ms Lau said the wide divergence in the domestic purchasing power of the US dollar and yen, plus the US Government's cuts of the twin budgetary and trade deficits - indicated that the US dollar is 'clearly undervalued' compared to its Japanese counterpart.

   Ms Lau added: 'The Japanese Government will be keen to reduce the strength of the yen by easing monetary policy. Yen strength is creating huge problems for Japan's export-led economy by reducing the competitiveness of Japanese exports overseas.

   'Economic fundamentals suggest that there is a strong case for a significant dollar recovery in the next 12 months.'   Wong Fook-yuen, a director of Rothschild merchant bank, said the US dollar would be struggling to appreciate five per cent against the yen this year.

   Mr Wong said: 'It very much depends on the current trade row. If it can be resolved then the dollar should pick-up.'    James Leslie, a director of Guinness Flight, added: 'It could take a lot of the next 12 months for there to be any gain in the dollar.'    But Mr Leslie thought the dollar could record gains of between 10 and 15 per cent against the yen during the next 12 months.

   Damien Hunt, managing analyst for International Money Data, thought 'the picture will remain bleak in Japan'.

   Mr Hunt said US-Japan relations would remain bogged down in trade disputes - and the Japanese economy would be increasingly hamstrung by problems with bank debt.



Fund managers predict rich pickings if the greenback rises