Currency traders and currency-focused hedge funds are finding it difficult to make money in the currency markets, judging from the performance of various trading strategies, which have declined from about 1 to about 9 percent.
The main reasons for this under performance are central bank interventions, slowing global growth, volatility linked to the euro zone crisis and ranging (as opposed to trending) markets.
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Commenting on central banks and Chile in particular, John Taylor, the founder of New York-based FX Concepts LLC, the world’s largest currency hedge fund said “Our position was relatively large, it was 8 or 9 percent of our total assets, and there was no way to get out. What was bad about it was that a couple of days later Israel did the same thing, then a week or so after that South Africa did the same thing, then after a little bit more study Brazil did the same thing. We got walloped every time.”
“It has been quite a tough year for trend-following systems,” said Maria Heiden, who oversees Hamburg-based Berenberg Bank’s 142 million-euro Currency Alpha fund, Germany’s biggest. “From May to August there has been no possibility to generate any returns” as the euro traded in a range, said Heiden.
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