Currency Markets and Fx Strategy
Currency markets are the largest and most liquid financial markets in the world, and exchange rate movements affect every internationally diversified portfolio. These articles explain how currencies are priced, what drives exchange rates, and how to think about currency risk and hedging in the context of global investing.
Emerging Market Currency Risk
Emerging market currency exposure quietly destroys portfolio returns in ways that equity drawdowns never do — a single overnight devaluation can erase years of yield advantage, and the damage compounds through channels most investors never model. In 2024 alone, the J.P. Morgan EM Currency Index f...
Carry Trade Mechanics and Risks
How currency carry trades work, the math behind borrowing in low-yield currencies to invest in high-yield ones, and why these strategies can unwind violently.
Dollar Index Composition and Signals
Understand the DXY dollar index structure, currency weights, historical ranges, and what index movements signal for global markets and portfolio positioning.
Corporate FX Risk Management
How multinational companies identify, measure, and hedge currency exposures through transaction, translation, and economic risk frameworks.
Interest Rate Differentials and Carry
Learn how interest rate differentials drive FX forward points and carry trades, including uncovered interest parity, carry mechanics, and risk calculations with worked examples.
How Exchange Rates Are Quoted
Master currency quotation conventions including direct vs. indirect quotes, bid-ask spreads, cross rates, and pip value calculations with practical examples.
Macro Drivers of USD Strength or Weakness
Analyzing the fundamental factors that determine dollar trends, including interest rates, risk appetite, trade balances, and fiscal policy, with historical context on USD cycles.
Using Options for Tail-Risk Hedges
Tail risk hedging sounds like the ultimate portfolio insurance: spend a little on options, sleep through crashes, and compound in peace. The reality is more brutal. Exposed to the relentless drag of option premiums, most tail-hedge programs destroy more value than they protect. AQR's research fou...
Measuring Trade-Weighted Exchange Rates
Understanding trade-weighted currency indexes including the Fed Broad Index, REER calculations, and how these measures differ from popular indexes like the DXY.
Central Bank Intervention in FX Markets
How central banks intervene in currency markets through direct purchases, verbal signals, and policy tools, with analysis of recent interventions and their effectiveness.
Cross-Currency Basis Swaps
Understanding cross-currency basis swaps, the basis spread, and why deviations from covered interest parity reveal important information about global funding markets.
Hedging Foreign Stock Positions
A practical guide to managing currency risk in international equity portfolios, including hedge ratio decisions, instruments, costs, and worked examples.
Currency ETFs and ETNs
A guide to exchange-traded currency products including single-currency ETFs, leveraged products, and the structural differences between ETFs and ETNs.
Political Risk and Currency Moves
How elections, policy changes, sanctions, and political instability drive currency volatility, with case studies of major historical moves.
Spot vs. Forward FX Markets
Understand the mechanics of spot and forward currency markets, including settlement conventions, forward points, and covered interest parity with worked calculations.
Reporting FX Gains and Losses for US Taxes
A $10,000 forex gain could cost you anywhere from $1,200 to $3,700 in federal tax — depending entirely on which IRS section governs the transaction. Section 988 treats forex gains as ordinary income (taxed at your marginal rate, up to 37%). Section 1256 provides 60/40 blended treatment that drops...
Using Currency Futures and Options
Master exchange-traded currency derivatives including CME futures contract specifications, currency options mechanics, hedging strategies, and margin requirements with worked examples.
Cryptoassets vs. Traditional Currency Markets
The foreign exchange market trades $9.6 trillion per day as of the 2025 BIS Triennial Survey—up 28% from 2022—through a global network of banks, central banks, and institutional dealers operating across overlapping time zones. Cryptocurrency markets trade $200-500 billion daily across hundreds of...
Glossary: Currency Market Terms
Essential definitions for foreign exchange terminology covering spot rates, forwards, trading mechanics, and hedging concepts.
Balance of Payments Impact on FX
How current account balances, capital flows, and persistent deficits influence currency valuations and long-term exchange rate trends.