By Jeremy Gaunt, European Investment Correspondent
LUXEMBOURG (Reuters) - Professional investors are betting on a weak dollar but many have reduced dollar hedges as the U.S. currency has hit a series of record lows.
The dollar has plummeted against major currencies, particularly the euro, but participants at this week's Reuters Funds Summit in Luxembourg this week said it would remain weak.
"We have a long-term conviction that the dollar will be weak. This (has) helped us perform," said Eric Helderle, managing director of French fund firm Carmignac Gestion.
But with the dollar's latest falls, the degree of investment protection against further declines has been reduced.
"The movement of the dollar has been so strong these last days, so at some point we reduced the hedging but it is only tactical," Helderle said.
Since the beginning of the year the so-called dollar index .DXY, which tracks the dollar against a trade-weighted basket of six major currencies, has fallen 6.6 percent.
The euro has risen around 7.7 percent, boosted by the euro zone's higher interest rates and different expectations of the European Central Bank and U.S. Federal Reserve.
The dollar has also been battered over the past few years by the U.S. economy's large current account deficit, although that is now falling as the dollar weakens.
"We continue to be pretty negative ... for the prospects for the U.S. economy. In that environment it is difficult to be too bullish on the dollar," Mark Kary, chief executive of hedge fund Polar Capital Partners, told the summit.
But Polar Capital too has hauled back its dollar hedges.
"We continue to be short the dollar but not a massive short at this stage," Kary said, adding that the firm was more bearish about sterling and the Australian dollar.
Timing the bottom of the dollar's slide, meanwhile, is proving tricky -- sometimes to the cost of investors.
Guy Wagner, managing director of wealth manager Banque de Luxembourg's asset management arm, said his firm had reduced its dollar hedge when the euro traded at about $1.45, believing the dollar had fallen as far as it was going to.
"We have been wrong," he said.
The euro was at $1.57 on Wednesday. Continued...
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