The Fund also uses enhanced income strategies by engaging in dividend capture trading; option overwriting; and realization of gains on the sale of securities, dividend growth, and
currency forwards. There is no assurance that the Fund will achieve its investment objectives.
Meanwhile, foreign central banks are holding the line on low interest rates for now, lagging the Fed and widening the yield spread on short-term rates that determine relative hedging costs in
currency forwards and cross-currency basis swaps.
Fund managers said Egypt's slide was at least partly due to jitters in emerging markets globally, although MSCI's emerging market equity index rose on Wednesday, and credit default swaps and
currency forwards do not so far show heavy pressure on the Egyptian pound.
"If there is flexibility on the timing of a transaction, an exporter may wish to look at purchasing
currency forwards where the exchange rate of a particular currency is locked in for a future date, but can be taken early if needed."
The insurgency in Iraq has not hurt overall market confidence in the Gulf; investors still see no direct impact on the Gulf Cooperation Council, where
currency forwards and credit default swaps have not risen in response to Iraq.
There is always the opportunity to hedge exchange risk and/ or buy
currency forwards.
"Now the spotlight in financial markets is focusing on the
currency forwards markets.
Unhedged net derivatives included $48 million of credit default swaps, $229 million in interest rate swaps and less than $1 million of foreign
currency forwards.
One-year Qatari riyal
currency forwards, which have been pushed up by the Syrian crisis, continued to climb on Tuesday, reaching 180.01 points bid, the highest level since March 2010.
This fuelled speculation in the
currency forwards market, which ultimately proved incorrect, that they might have to abandon their pegs.
The fund utilises
currency forwards with a directional bias in the “carry” component of the strategy.
Three-month onshore
currency forwards traded at 56.96 per dollar, compared to 56.92 on Monday, and offshore non- deliverable contracts were at 57.09 from 57.07.
