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Institutional Insights: Barcalys FX Thoughts For The Week Ahead

Thoughts for the Week Ahead VaR-ying volatility - By using a stylized VaR analysis, we illustrate that the extreme moves in equities globally, and the accompanying surge in implied volatility, might have forced investment managers to reduce risk indiscriminately across assets, including FX. If portfolio managers were indeed driven to unwind FX positions due to risk limit considerations, the more “popular” trades should see larger under performances, in our view. The past week’s FX performance, examined in conjunction with positioning indicators and options pricing, provides some evidence of such behaviour...
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