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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
FOREX
- Empirical and academic research have often considered FX strategies as a good diversifier of the classical equity/bond portfolio as they tend to offer a low correlation to major asset classes.
- However, the performance of popular FX strategies such as carry or momentum show that they tend to co-move quite significantly with risk-on long-only strategies when price volatility rises.
- For instance, the carry trade strategy, which consists in investing in currencies with very high interest rates by borrowing in currencies with very low interest rates, tends to experience significant drawdowns similar to the equity ones when the VIX rises.
- This chart shows an interesting co-movement between the AUDJPY exchange rate, which could be viewed as a proxy of the carry trade strategy (investors borrow in JPY to invest in AUD), and EM equities.
- Hence, with some risky assets trading at multi-year highs, investors should be aware that investing in commodity currencies (such as the AUD, NZD or CAD) against the JPY will simply add more risk to their traditional portfolio and therefore run the risk of intensifying their losses in case price volatility starts to rise.
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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