The increasing FX

FX-linked products are on the rise as yield hungry investors look to one of the few underlyings that has been feasible to structure into short term capital protected notes in recent times while hedging conditions improve for issuers. A transparent and liquid way of accessing both emerging markets and commodities themes, it is rapidly becoming defined as a viable, de-correlated alternative investment. Sophia Morrell reports

FX-linked structured products have enjoyed a relative boon throughout the financial crisis. Although volatility spiked, it remained lower than other asset classes, and liquidity recovered more quickly by comparison.

This disparity was clear across both developed and emerging markets. In the UK for example, maximum 10 month volatility during the crisis hit 47.21% in the FTSE 100, against only 25.5% in the sterling spot rate. In India, the Rupee's maximum 10 month volatility was 14.36% in May 2009