MT4.MT5 related; forex market super year: the exchange fund glows in the new year

Financial Associated Press, August 3 (Editor Xiaoxiang) If you told people a year ago that the dollar against the yen would approach the 140 mark, or the euro against the dollar would fall below parity, obviously no one would believe you, but this scene It really happened this year.

 

As Andrew Beer, founder of Dynamic Beta investments in New York, put it, it's an absolutely shocking change. And such a hot super market has also caused quite a stir in the foreign exchange industry that has been silent for many years.

 

According to data from hedge fund research firm Eurekahedge Pte, foreign exchange hedge funds are on track for their best "report card" since 2003 due to rising currency market volatility and marked differences in monetary policy among central banks.

 

Barclay Hedge's index tracking the performance of hedge funds also showed trend-chasing foreign exchange managers are set for their strongest performance since 2003.

 

All of this is clearly in stark contrast to the difficult situation for funds in the overall foreign exchange sector after the global financial crisis.

 

Over the past decade or so, as central bank officials raced to launch dovish policies with near-zero or even negative interest rates, interest rate spreads and momentum strategies were almost "useless", and price fluctuations in the foreign exchange market were often dizzying. Lethargic, which also indirectly contributed to the overall depression of the foreign exchange trading business.

 

In fact, even after many left-behind foreign exchange funds in this field finally had a "full meal" this year, the crisis has not yet been fully overcome.

 

The number of private equity funds specializing in foreign exchange trading peaked in January 2010, but has plummeted by nearly 80% since then, according to Barclays Hedging.

 

Benjamin Crawford, vice president and head of research at BarclayHedge, said, “There is very little data on new funds in the FX space, and the former glory seems to have faded.”

 

Fortunately, this year's "super year" in the foreign exchange market is expected to temporarily relieve institutions and traders who are deeply involved in this industry.

 

"Super Year" in the foreign exchange market

The sharp tightening of monetary policy by the Federal Reserve has also triggered wild swings in currencies from Europe to Asia, while pushing the dollar to multi-decade highs. This has proven to be a "godsend" for a small group of quantitative traders and fund managers specializing in the foreign exchange market, and they have achieved rich returns not seen in more than a decade.

 

Rising rates should help fund managers reap returns from arbitrage strategies, said Luc de la Durantaye, chief investment officer at CIBC Asset Management. This strategy mainly refers to borrowing low-yielding currencies and investing in high-yielding currencies.

 

“There is now less synchronization of economic cycles across countries around the world, which will create more volatility and thus more trading opportunities,” Durantaye noted.

 

“It’s clearly a 180-degree turn, central bankers have to raise rates now, and they have to raise them significantly,” said Pablo Calderini, chief investment officer at Graham Asset Management. “Fixed income assets are at the center of this storm. , commodities, stocks and of course foreign exchange are also being affected.”

 

Calderini helps manage a $1.5 billion macro investment strategy that has surged 45 percent in the first half of the year, driven largely by bets on long dollar-euro and dollar-yen bets. Both the euro and the yen have fallen to their lowest levels in 20 years this year on the back of Fed tightening.

 

In addition to spread trading, market risk aversion triggered by the conflict between Russia and Ukraine has also exacerbated market volatility in the foreign exchange market. An indicator of Deutsche Bank's currency volatility has recently risen to the level at the beginning of the epidemic, which helps Traders arbitrage between different markets.

 

There are still good opportunities

Looking ahead, given the rising uncertainty about inflation and economic growth prospects, many hedge funds in the foreign exchange field expect that there will be more trading opportunities in the foreign exchange market in the future.

 

For example, Alan Ruskin, chief international strategist at Deutsche Bank, predicts that if a solution to Europe's energy crisis is found, the euro could surge 30%, which could lead to huge gains for currency hedge funds that are long euros.

 

Of course, there are also market players who are currently holding the completely opposite view - other institutions such as macro hedge fund EDL Capital AG are betting that the exchange rate of the euro against the dollar may fall by another 20%, as low as $0.80.

 

In any case, however, an easy-to-make opportunity like betting on a rising dollar is unlikely to repeat itself anytime soon, and given that hopes for a strong recovery in the industry have been dashed time and time again, money funds that specialize in foreign exchange investments may now be will remain a rare category.

 

Melissa Brown, a former Goldman Sachs partner who is now head of applied research at consulting firm Qontigo, said that even with a new round of market volatility, it is unlikely that a large number of new foreign exchange funds will emerge quickly. But from an investment point of view, we will definitely see more attention paid to the foreign exchange market. "

 

In addition, more hedge funds are likely to focus on diversified investment strategies across markets.

 

Graham’s Calderini said, “Even now that the foreign exchange market is doing well, people will realize that the more ideal allocation is those funds that are not limited to trading a single market, and they can fully integrate the global macro narrative theme. Trade multiple asset classes.”