This paper presents Record's view of the opportunities to target excess returns in currencies. We present both the fundamental underpinnings of these opportunities and the macroeconomic phenomena which give rise to them. The four opportunities, or “factors” considered here are:
We then consider how these factors can be combined to produce a diversified portfolio. Each factor has a different relationship to the underlying macroeconomy, and combined together they result in a robust and well diversified currency portfolio with appealing return and risk characteristics.
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