Currency funds posted gains in March as managers benefitted from being long commodity and long emerging market currencies, according to the latest Parker FX Index report.
Funds focusing on foreign exchange reported a +0.78% return in March with 40 funds out of 62 in the index reporting positive results. The performance for March ranged from a high of +4.72% to a low of -3.93% according to Parker Global Strategies, which does not disclose the names of the funds. The year to date return of the Parker FX Index is +0.80%.
Parker also has two style driven sub-indices: the Parker Systematic Index, which tracks those managers whose decision process is based on computer models, or systematic trading, and the Parker Discretionary Index, which tracks managers whose decision process is judgmental. During March, the Systematic Index reported a +0.60% return and the Discretionary Index was up 0.95%. Year to date the Systematic Index is up 0.42% and the Discretionary Index is up 1.18%.
During the month the US dollar continued its appreciation relative to the majors with the DXY Index gaining 0.62%. The US dollar rally was driven by strengthening US economic figures, subdued inflation and on dropping selling pressures. Additionally, the dollar has been a beneficiary of the uncertainty in the euro-zone amid the
Greek debt crisis as investors sold euros.
The Japanese yen, meanwhile, declined 4.85% relative to the dollar due to dampened demand for the refuge currency on continued signs supporting a global economic recovery.
Managers that were long commodity currencies benefitted with positioning in the Canadian dollar, Australian dollar and New Zealand dollar, all of which appreciated against the US dollar amid strengthening oil prices. Managers that were long emerging market currencies also benefitted from gains in the Mexican peso, which was up 3.39% versus the US dollar after the Mexican Finance Ministry raised its forecast for the country’s economic growth.
Managers in the emerging space also gained from long positions in the Hungarian forint, which was up nearly 1% versus the US dollar on indications that economic growth will continue to expand due to low inflation figures.
The Parker FX Index is a performance-based benchmark that measures both the reported and the risk adjusted returns of global currency managers. The compounded annual return since inception (January 1986 through March 2010) is up 12.01% on a reported basis and up 3.16% on a risk adjusted basis.