FX hedge funds rethink strategies as returns fall

Switching gears

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For much of the last decade, foreign exchange (FX) trading was a pretty straightforward game.

Currency managers were able to earn healthy returns by exploiting a couple of simple factors: carry and momentum.

The carry trade involves selling a low interest rate currency and investing the proceeds in a higher-yielding currency, while momentum strategies exploit the tendency of FX moves to trend over time.

Data from Deutsche Bank shows carry and momentum strategies earned annualised returns of 7.27% a