First of all I want to apologies for the lack of posts. I'm finally back to work now, but quite exhausted from the travels - so I will slowly be returning to regular posting over the coming days.
Today I just wanted to touch on a topic that our fund opened some short contracts on Czech Krona just recently. We have been very patient in our wait to add some positions against East European currencies like Hungarian Forint, Polish Zloty and Czech Krona. The current position is about 1% of our current fund, so not a serious investment on relative terms - but we are happy to maintain US Dollar exposure in the current environment.
We believe that growth slowdown will be most felt in Europe and their surrounding emerging economies, where some of the central banks might soon start cutting interest rates. In general, the US Dollar could be pricing in a global easing phenomenon, where average monetary policy rate is being reduced against that of the Federal Reserve's 0.25% stance.
In the chart above, you can see that the US Dollar tends to stage a rally before central banks move into easing stance relative to the Fed. We should all remember that markets are discounting mechanisms, so the current rally in the "King Dollar" could be doing just that, similar to that of 2004/05 and 2008/09, especially against the Eastern European currencies.