FUNDVIEW-U.S. debt problems keep FX managers away from dollars

LONDON Aug 1 (Reuters) - A deal to increase U.S. borrowing may prevent a debt default, but currency fund managers say it would do little to shake off their bearish stance on the dollar, adding they would remain underweight on assets denominated in the U.S. currency.

At the same time, they are hesitant to pick up Swiss franc-denominated assets, given the franc's surge to all-time highs. They preferred to stay overweight in emerging currencies on the view that developing economies will continue to grow faster than developed ones.

Some see the risk the U.S. may lose its AAA rating even if the Senate on Monday passes a deal to raise the debt ceiling and cut about $2.4 trillion from the deficit over the next decade.

Managers on Monday said this was another reason to avoid the world's most liquid currency, along with weak U.S. economic growth prospects and the ongoing shift away from dollars by reserve managers.

"Even if this plan goes through, it won't change things much," said Thanos Papasavvas, head of currency management at Investec Asset Management, which has $10 billion in assets under management.

"(Because of) the structural story, the cyclical story, and the reserves story, we have a pretty negative outlook on the dollar," he said, adding he saw a "decent" possibility that Washington would lose its triple-A status.

Papasavvas said he remained underweight dollar assets as a result, while adding he was overweight those denominated in euros and Asian and emerging currencies.

Ken Dickson, investment director at Standard Life Investments in Edinburgh, said he was also bearish about dollar-denominated assets, while staying long on emerging currencies.

Standard Life Investments, which has $156.9 billion in assets under management, was also short the euro, Dickson said, as the debt problems plaguing the euro zone were likely to continue, holding the region back from significant growth.

"Given the general outperformance of developing markets versus developed markets, we still favour short positions in euros and dollar against emerging market currencies," he said.

"I don't think the developments over the weekend changed that very much," he said, referring to a last-minute debt deal struck by U.S. lawmakers.

He added that the dollar and the euro, two of the world's most widely traded currencies, had fallen out of favour given that both the U.S. and the euro zone are suffering fiscal problems in the face of struggling growth.

Both the dollar and the euro hit all-time troughs versus the Swiss franc on Monday, having each tumbled roughly 6 percent last month.

Papasavvas at Investec said he was underweight Swiss francs and the yen, while Dickson pointed out that both the Alpine and the Japanese currency were "expensive".

Both managers said they had not been very active in their changing their currency positions in the past few weeks, while adding that they did not plan to significantly alter their portfolios on any outcome of the U.S. debt plan. (Reporting by Naomi Tajitsu; editing by Ron Askew)