Within the currency strategies, Value had another positive month, while Trend took a hit. Carry also had a weak December.

Within Trend, the large, long US dollar (USD) position was a detractor. The USD’s reversal continued in December, with the currency falling against all other G10 currencies except the Canadian dollar (CAD). The large, short Japanese yen (JPY) position was another major detractor, while the small, long euro (EUR) position added to performance. In contrast to the greenback, the JPY was the strongest currency, benefitting from the Bank of Japan’s widening of the band for its yield curve control policy from 0.25% to 0.5%. The 10-year Japanese government bond yield rose, supporting the yen.

Within Carry, the short positions in JPY, the Swiss franc (CHF) and EUR suffered, as funding currencies such as the EUR and the CHF significantly strengthened this month after their respective bond yields shot higher. However, the long position in the New Zealand dollar contributed positively.

Meanwhile, Value continued its recovery, with the long positions in JPY, the British pound (GBP) and EUR being additive and short positions in the CHF and the Norwegian krone (NOK) detracting from performance. Commodity currencies such as the NOK, Australian dollar (AUD) and CAD were at the weaker end of the G10 spectrum since recession fears for 2023 weighed on the outlook for raw material prices