An ongoing debate has long persisted in the global currency or FX markets – is FX an “asset class” akin to stocks and bonds? While practitioners and academics may debate this point at length, perhaps the most practical answer is – does it really matter provided that investors may draw a return from currency investments?
The performance of the currency or FX markets is found in the exchange rates and cross-rates associated with the world’s myriad currencies. Many fundamental factors, including national economic conditions, monetary policies, current and capital account flows, impact the returns associated with the world’s currencies.
This document represents a review of these factors as they played out in the most recently completed calendar quarter. We include consideration of the so-called “carry trade” as well as a look at the theory of "purchasing power parity" as it impacts FX markets.