Global Currency Funds Gain Amid Coronavirus Volatility


NEW YORK (Reuters) – Global currency fund managers posted gains in the first quarter, taking advantage of the extreme volatility the coronavirus pandemic has fueled in financial markets.

The BarclayHedge Currency Traders Index rose 6.13% for the first three months of the year and posted a gain of 2.54% for March, according to data released by the company on Friday, showing the results of 42% of the funds it tracks.

In contrast, the S&P 500 fell 20% in the first quarter in its worst quarterly decline since March 2009, while US crude oil fell 66%.

Gains in currency funds have resulted in increased market swings that traders need to make money, as expectations of the coronavirus-fueled global downturn have prompted investors to exit a wide range of currencies and retreat. turn to the US dollar.

The first quarter followed a long period of sleepy trading in the currency markets that had frustrated investors and shut down many funds over the years.

“March has been a time of savage deleveraging, sharp reversals and extreme moves,” said Richard Benson, co-chief investment officer at Millennium Global Investments in London, with $ 18 billion in assets under management.

Deutsche Bank’s currency volatility index climbed to 16.36 on March 19, its highest level since at least 2012. It now stands at 10.63. In specific currency pairs, such as the dollar / yen, the push was even greater, reaching levels not last seen in November 2008 amid the global financial crisis.

Many market fluctuations have relied on movements in the US dollar and, to a lesser extent, other safe haven currencies such as the yen and Swiss franc.

The dollar was the best performer in the forex market in the first quarter, posting gains of around 2.6% against a basket of major currencies as fears of an economic slowdown prompted investors to sell assets at all times. levels and build up cash.

The dollar rose 1% last month despite a series of Federal Reserve measures aimed at flooding the financial system with greenbacks to deal with a liquidity shortage caused in part by demand for US currencies.

The Swiss franc and the yen, two other popular destinations for nervous investors, rose 3% and 1% respectively in the first quarter.

Other currencies suffered heavy losses. Sharp declines in the prices of oil, metals and other commodities sparked routs in commodity currencies like the Australian dollar and Norwegian krone, which fell 12% and 18% in the first quarter, respectively.

The declines in some emerging market currencies at the end of March were particularly striking. The Brazilian real fell 23% in the quarter while the Mexican peso slipped 20%.

“In times like this, you should be long on the US dollar, yen and Swiss franc and short anything that has low liquidity like the Swedish krona, Norwegian krone and currencies close to global growth like Australian and Canadian dollars, ”Momtchil said. Pojarliev, Head of Currencies at BNP Asset Management in New York.

BNP Paribas Asset Management’s foreign exchange program also increased in March, with a return of 1.5% to 2% on a volatility of 5%. Long positions in the US dollar and Japanese yen helped BNP’s performance, Pojarliev said.

“If anyone’s made money in this environment it’s by being risk averse fairly quickly,” said Adrian Lee, chairman and chief investment officer of active currency manager Adrian Lee & Partners, who oversees 12 billion dollars in assets.

“To some extent, there was a very gradual response to all of the information coming out of China. We therefore became cautious from the end of February and we still are. “

Lee and Millennium’s Benson both said their funds won in March.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Ira Iosebashvili and Tom Brown

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