Have Currency Dynamics Become Too Important To Ignore?

There are several global themes impacting currency markets that are raising currency policy questions at European Professional Investors Investment Committee meetings.

From the start of the COVID crisis the USD benefitted from its de facto dominance as the world's reserve currency and its undisputed safe haven status. Roll forward to 2022 the greenback has risen to levels not seen since the 1990's or March 2020, supported by the relatively early and more hawkish FED versus other central banks in developed markets.

In contrast, other Developed and Emerging Market currencies have sold off, and not just the Euro and the Renminbi. The Norwegian Krone, Australian Dollar, South African Rand and the Chilean Peso can be added to the list.

Behind the monetary policy diversion story is the question, who will benefit or suffer in the short term scramble for commodities, and the long term shift away from fossil fuels. And more importantly, is it time to put a currency overlay in place, either as a hedge, or an alpha generation source?