29/08/2016

CurrencyTradersCantLoseasTrustedStrategiesReapBigGainsBloomberg

CurrencyTradersCantLoseas
TrustedStrategiesReapBigGains
SusanneBarton

SuziAnn2
August29,20167:00AMSGT

Everyonesawinnerinthe$5.3trillionadayglobalcurrencymarketthisyear.
Forjustthesecondtimeinthepastdecade,threemajorforeignexchangetradingstrategiesare
allproducingpositivereturns.Thecarrytrade,inwhichinvestorsborrowinGroupof10
currencieswithlowinterestratesandusetheproceedstobuyassetswithhigheryields,ison
paceforitsbiggestannualgainsince2012,accordingtoDeutscheBankAGindexdata.Trades
thatbuyundervaluedcurrenciesandsellexpensiveones,andtacticsthatlatchontoforeign
exchangetrends,arealsomakingmoney.

Choosingthecorrectforeignexchangestrategyhasbecomeevenmoreimportantinaworldof
unprecedentedcentralbankmonetarystimulusandcurrencieslinkedtohistoricallylowinterest
rates.InvestorswererecalculatingtheirapproachesonAug.26afterFederalReserveChair
JanetYellensJacksonHole,WyomingspeechboostedthelikelihoodforhigherU.S.rates
whilemonetarypolicymakersinEuropeandAsiaaddstimulus.
"Centralbankpolicyisalwaysgoingtobethenumberonedriverofourstrategy,"saidJames
Ong,anAtlantabasedseniormacrostrategistatInvesco,whichmanages$812billion."The
abilitytoacknowledgethevaluationandpolicydynamicsinJapanwasthenumberonething
thathelpedus.Diversifyingsomeofourtradesawayfrombeingdollartradesalsohelpedas
well."
Whileemergingmarketbasedcarrytradesstumbledthismonth,theDeutscheBankmeasure,
whichfocusesonmorewidelytradedG10currencies,hasreturned5.8percentthisyear,astark
reversalfromlastyears7.7percentdecline.

http://www.bloomberg.com/news/articles/20160828/currencytraderscantloseastrustedstrategiesreapbiggains

1/5

29/08/2016

CurrencyTradersCantLoseasTrustedStrategiesReapBigGainsBloomberg

GlobalinvestorshavepiledintotheAustralianandNewZealanddollars,luredbyyieldsthat
evennearrecordlowsstillpayapremiumoverbondsfromJapan,EuropeandtheU.S.Their
rallies,aboonforcarrytradeinvestors,flyinthefaceofAntipodeancentralbankerswho
continuetocutratesinanefforttoboostinflation.
"AussieandKiwihavebeenmoving,despitecentralbankssayingmorecutsmaybeinthe
pipeline,"saidUgoLancioni,amoneymanagerinLondonatNeubergerBermanGroupLLC.
Thefirmhasabout$246billioninassetsundermanagement.Capitalappreciationhasallowed
thestrategytoperformwell."
Thevaluationstrategyisup5.1percentin
2016,onpaceforitsfourthstraightyearof

Startyourdaywithwhatsmovingmarkets.

gains,accordingtoDeutscheBankdata.

Getourmarketsdailynewsletter.

Theyen,morethan14percentundervalued
versustheOrganisationforEconomic

Enteryouremail

SignUp

CooperationandDevelopments
purchasingpowerparityexchangerateto
starttheyear,hassurged18percentin
2016,defyingforecastsforweaknesseven
amidrenewedmonetarystimulusbythe

BankofJapan.

Theyen,andthevaluationtrade,stillhaveroomtorally,accordingtoVirajPatel,aforeign
exchangestrategistatINGGroepNVinLondon.
"Theyenhasbeenthetradeoftheyear,"saidPatel,whoforecaststhecurrencytoendtheyear
at95perdollar."WecantreallyseetheBankofJapanspolicyassessmentsleadingtoany
conclusionthatwouldseethemexpandingmonetarypolicyaggressively."
Eventhemomentumtradeisnoslouchwitha3percentgainthisyear.Tradersutilizingthe
tacticoftenapplymodelsthatanalyzehistoricalpatterns,suchasmovingaveragesandlevelsof
supportandresistance,forcluestowhetheratradehasrunoutofsteamorhasmoreroomtogo.

http://www.bloomberg.com/news/articles/20160828/currencytraderscantloseastrustedstrategiesreapbiggains

2/5

29/08/2016

CurrencyTradersCantLoseasTrustedStrategiesReapBigGainsBloomberg

InvestorswhosoldtheBritishpoundduringthe12monthsbeforetheU.K.svotetoleavethe
EuropeanUnionprofitedwhenthecurrencyplungedasmuchas13percentinthedaysafter
Brexit.
Momentumforusitsbeenoneofthebestperformingstrategies,"saidJavierCorominas,a
Windsor,U.K.basedmoneymanageratRecordCurrencyManagement,whichoverseesabout
$53billioninassets."WewentintotheBrexitvoteshortpoundthroughourmodels."Ashort
positionisabetthatanassetwilldeclineinvalue.

Itsthefirsttimesince2014andjustthesecondtimesince2005thatallthreestrategiesareset
torally.Yetamidthestrongperformance,manyforeignexchangeinvestorshavestruggledthis
year.Somemisjudgedtheimpactmonetarystimuluswouldhaveontheyen,whileotherswere
pummeledbyvolatilityafterBrexit.
"Youvegottobenimbleandbeabletoadjust,"saidAxelMerk,SanFranciscobasedfounder
ofMerkInvestmentsLLC,whichmanages$300millioninassets.
Atthesametime,soundmonetarypolicyanalysishascreatedtheconditionsfortrustedforeign
exchangestrategiestoprofit.
"Thebiggestdevelopmentincentralbankpolicythisyeariscentralbanksmakingitexplicit
thatcurrencymovesarepartoftheirmonetarypolicyresponsefunction,"saidCollin
Crownover,headofcurrencymanagementatStateStreetGlobalAdvisorsInc.,whichoversees
about$2.4trillion."Peoplearelookingforyieldandtheyarenotasworriedaboutcertain
currenciesbeingovervaluedanymore."

http://www.bloomberg.com/news/articles/20160828/currencytraderscantloseastrustedstrategiesreapbiggains

3/5

29/08/2016

CurrencyTradersCantLoseasTrustedStrategiesReapBigGainsBloomberg

TermsofServiceTrademarksPrivacyPolicy
2016BloombergL.P.AllRightsReserved
CareersMadeinNYCAdvertiseAdChoicesWebsiteFeedbackHelp

VIDEO

TheNewAppShaking
UptheOnlineDating
Industry
AUDIO

OddLots:The
UnbearableBrightness
ofBeingaShadowBank
LiveTV

Schedules+Shows

Updated2daysago

Secret
Cameras
Record
Baltimores
EveryMove
FromAbove
Subscribe

Stocks

Silicon

Currencies

Valley

Commodities

Global
Tech

BothSides
Agree:
TrumpWill
Be

Its
Worth
Going
tothe

Winners
and
Losers
inthe

http://www.bloomberg.com/news/articles/20160828/currencytraderscantloseastrustedstrategiesreapbiggains

ToTrack
London
Gentrification,
Findthe
4/5

29/08/2016

CurrencyTradersCantLoseasTrustedStrategiesReapBigGainsBloomberg

Rates+

Venture

Bonds

Capital

Economics

Hacking

Magazine

Digital

Benchmark

Media

Watchlist

Bloomberg

Economic

West

Unpredictable
in
Presidential
Debates
Aug28,2016

WithAllDue
Respect

Calendar
LIVETV

DelegateTracker
CultureCaucus

AUDIO

Podcast
MastersInPolitics
Podcast

US
Open
Just
forthe
Food
This
Year

New
China

StreetFood
Markets

Aug28,2016

Updated2daysago

View

Subscribe

Gadfly

CoverStories
OpeningRemarks
Etc

Updated2
daysago

Features

Cars&

85thAnniversary

Bikes

Issue

Style&

BehindTheCover

Grooming

WhatTheVoters
AreStreaming
Editors'Picks

Spend
Watches
&
Gadgets
Food&
Drinks
Travel
Real
Estate
Art&
Design

Science+
Energy

GraphicsGame
Plan

Small

Personal

Inspire BoardDirectors Sponsored

Business

Finance

GO

Forum

http://www.bloomberg.com/news/articles/20160828/currencytraderscantloseastrustedstrategiesreapbiggains

Content

5/5