Recent Articles

21st July 2014
Hedging Renminbi Risk – End of the one way bet?

In mid-January, the renminbi strengthened to a rate of 6.0406, its strongest level against the US dollar since China de-pegged its currency from the dollar in 2005. Since that time, USDCNY had effectively been a one-way bet; the CNY was both an attractive vehicle for carry traders seeking to exploit the renminbi’s juicy yield (currently almost 5%!), as well as a way for corporate treasurers to boost profits, often using structured derivatives (such as target redemption forwards) to capitalize on a view that the CNY would continue to strengthen. 


 Beginning in January, however, the renminbi began to weaken, posting four monthly losses in a row against the US dollar (there had never been more than two monthly losses in a row in the nine years since the establishment of the managed float regime).  In March, the Peoples Bank of China (PBOC) upped the ante even further, doubling the USDCNY...

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14th July 2014
The Big Mo: Sterling has the support of one of the most powerful (and inexplicable) forces in the financial markets: momentum. But are there signs that this energy may be starting to wane…?

“Some shoppers queue all night to buy goods in the January sales.  When it comes to stock markets, however, investors take the opposite approach: they flock to buy shares that have risen in price.”


The Economist, January 6th 2011


Germany’s victory in the World Cup last night was not a surprise.  Most pundits confidently predicted that they would beat Argentina, and the bookie’s odds reflected this fact: Argentina was given only a slightly better than one in three chance of winning before kick-off.   It is interesting to note, however, that before the tournament began, it was Argentina who were the second favourites to win the trophy – behind only their Brazilian hosts (Germany were third favourites).


So what changed in a little over a month to make Germany such hot favourites last night?  In a word, momentum.  Consistent performances throughout the tournament, culminating in that 7-1 humiliation...

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7th July 2014
2014 Forecast Report Card

With a combination of the July 4th holiday and the world cup quarter finals ensuring that the currency markets experienced one their quietest weeks of a pretty quiet year last week, it seems an opportune time to review our 2014 currency forecasts, assessing what we got right, what we got wrong, and whether it is time to adjust our views….





In January, with GBPUSD trading at 1.6560, we wrote: “in the short term, continued signs of improving economic conditions could continue to drive GBPUSD higher, as confidence in the sustainability of the UK’s economic recovery grow stronger…” (Link)



Whilst this view was correct, our forecast, as it turns out, has been nowhere near bullish enough.  With GBPUSD breaking through the 1.70 level in late June, the case for raising our forecasts significantly higher is growing stronger.  As we wrote on the 27th of January...

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