A Case for Currency in Institutional Portfolios
The Currency Conundrum: Regret Versus Optimal Hedging
Global Asset Allocation and Optimal US Dollar Hedging
Alternative Currency Hedging Strategies with Known Covariances
Strategic Asset Allocation and Currency Betas
Separating Currency Returns from Asset Returns in Theory and Practice: Conscious Currency and Beyond
Economic Data Surprises and Currency Alpha
Is Trend Following in Foreign Exchange Markets Going Out of Fashion?
The Carry Trade: The Essentials of Theory, Strategy and Risk Management
Carry Trades in Emerging Markets
Investing in Emerging Market Currencies: A Rewarded Risk
The Currency Investing Process: Managing G10 Currencies
Systematic Currency Trading
A Discretionary Approach to Currency Investing
Due Diligence as a Source of Alpha
Currency Forecasting: Generating Views about Foreign Exchange
Exchange Rates, Risk Premia and Inflation-indexed Bond Yields
Currency Investing: A Risk Premium Approach
Currency Management Styles: Ten Years On
The Future of Currency Investing in Institutional Portfolios
Getting the macro story right is key to successful discretionary currency management. It is also very important for systematic currency programmes to incorporate the evolving macro landscape, as it might influence the calibration of the various embedded strategies. For example, in 2008, it became critical for proper adjustments to be made in the weights on the “momentum” and “carry” components of a typical systematic currency programme.
Currency managers need to understand and have an opinion on the main cyclical and structural macro themes, which have three broad aspects: (i) macro, including macro data and trends; (ii) policies, including monetary and other policies; and (iii) markets, including positioning, momentum and other relevant features of market participation in various trades.
This chapter presents five themes related to post-crisis globalisation that have implications for currencies. Some of these themes are macro-oriented, while others are more related to policies or markets. The examples aim to illustrate how views on currencies can be derived from the various thoughts on macro.
POST-CRISIS GLOBALISATION AND THE DOLLAR
More than a cyclical shock to the global