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Last week, the U.S. dollar made a sharp recovery against the world’s most heavily traded currencies on news that the Federal Reserve, the Bank of Canada, the Bank of England, the European Central Bank, and the Swiss National Bank were adopting several measures intended to address pressures in short-term lending markets. By injecting short term funds through a broader range of counterparties and against a broader range of collateral than open market operations, Central Banks hope to promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress. However, this was not good news for the performance of our portfolio since we held several currency positions against the U.S. dollar. In fact, over the last week the DailyFX Dynamic Carry Trade Basket was down by nearly 810 pips. The biggest losses were taken in the long position we held in the Sterling against the U.S. dollar (-295 pips), in the long position we took in the Australian dollar (-263 pips) and in the long position we held in the New Zealand dollar.
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