9 Aug 2013
Flash: When to add long USD risk? - Nomura
FXstreet.com (Barcelona) - Nomura's core view continues to be long U.S. Dollar over the medium term, according to Ankit Sahni and Jens Nordvig, FX Strategists at the Bank.
Key Quotes
"We are looking at a few main signals: 1) underlying expectations for US growth; 2) the slope of forward rates (2s10s 3 year forward, for example); 3) volatility in the long-end and related flow dynamics. If these indicators turn more supportive, we would be more inclined to add long USD risk."
"In terms of specific trades, we remain long USDCAD through long-dated call spreads and long USDCHF. But we are increasingly uncomfortable with short GBP exposure and are closing out our USD basket trade, which had a GBP component. This trade was initiated on 5/29, and we are booking a loss of 2.6%."
"We will revisit the notion of long USD baskets once we deem the timing more appropriate, likely with a different composition (excluding the GBP and perhaps including some EM components, too)."
Key Quotes
"We are looking at a few main signals: 1) underlying expectations for US growth; 2) the slope of forward rates (2s10s 3 year forward, for example); 3) volatility in the long-end and related flow dynamics. If these indicators turn more supportive, we would be more inclined to add long USD risk."
"In terms of specific trades, we remain long USDCAD through long-dated call spreads and long USDCHF. But we are increasingly uncomfortable with short GBP exposure and are closing out our USD basket trade, which had a GBP component. This trade was initiated on 5/29, and we are booking a loss of 2.6%."
"We will revisit the notion of long USD baskets once we deem the timing more appropriate, likely with a different composition (excluding the GBP and perhaps including some EM components, too)."