Insights

The dollar weakened against most major currencies in January, pressured by reports that US President Trump would impose tariffs gradually. However, he later announced tariffs on Canada, Mexico, and China starting February 1.

The Japanese yen was the biggest gainer, as expectations of a BoJ interest rate hike materialized. The aussie and kiwi also strengthened, following pledges by Chinese authorities to stabilize the yuan and stock market. Trump’s preference for negotiating a trade deal with China rather than imposing tariffs also helped (although Trump proceeded with tariffs at the beginning of February). The euro ended the month slightly higher due to dollar weakness but lost some ground towards the end of the month as, following the ECB’s rate cut, investors have been expecting another 85bps worth of reductions by year-end. The British pound suffered amid concerns that the new UK government might raise taxes beyond what was announced in the Autumn budget, which triggered a selloff in UK stocks and bonds. Gold hit record highs due to uncertainty surrounding Trump’s trade policies.

The FX market experienced a level of erratic behaviour in January, largely driven by the actions and announcements from the newly inaugurated US president. These developments resulted in sudden and short-lived movements that caused a significant amount of uncertainty. As expected, these conditions created an environment lacking in steady, directional movements, which in turn presented challenges for positioning. The lack of sustained market momentum made it difficult to maintain positions with confidence, as sentiment frequently reversed within a short time. 

Given these conditions, the IXI Fund experienced a high frequency of switching between winning and losing days. Consequently, profitability fluctuated throughout the month, with the Fund’s performance shifting signs on several occasions. Despite the nature of the market, the strategy was able to capitalize on the limited opportunities presented.