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JPMorgan Develop New BRL Positioning Indicator
- JPMorgan note that trading in BRL is uniquely concentrated in forwards and futures. According to the BIS, ~70% of BRL turnover is in outright forwards (against 15% for all currencies) while only 16% is in spot transactions versus 30% for all other currencies.
- Tracking investor positioning in BRL FX is therefore not a trivial task and JPM tackle this challenge by developing an index that unifies the information contained in the available sources into a single metric: The JPM BRL positioning Index.
- Their intention is for the JPM BRL Positioning Index to be used as part of a broader, holistic discretionary process. Nonetheless, JPM back-test a simple systematic strategy to sense-check its usefulness and find it is a potentially profitable indicator. The Index is available on Bloomberg with ticker JPRABRLP Index and will be updated weekly on Mondays.
- Currently, the JPM BRL Positioning Index is close to neutral, which challenges the anecdotal evidence of investors being heavily long the currency and supports JPMorgan’s overweight BRL in the GBI-EM Model Portfolio.
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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.