By Gordon Platt
Best Foreign Exchange Research & Analysis
BNY Mellon, one of the largest foreign exchange dealers in the US, trades more than $42 billion in the FX market on an average day. The bank’s 10 trading desks around the world execute more than 14,000 FX transactions daily.
Simon Derrick, head of currency research, BNY Mellon Global Markets, says: “Our aim has always been a simple one: to provide our clients with as clear a picture as possible of the forces driving the largest market in the world.”
Over the past decade, he adds, this has meant understanding the currency wars between nations, the carry trade, as well as the difficult path that eurozone nations need to follow as they transform the currency union into a fiscal union. “No doubt the next few years will see the driving forces for the market mutate once again,” Derrick says. “Changing patterns of energy production globally, along with new manufacturing methods, seem likely to transform the world in a multitude of ways, bringing very different patterns of currency flows.”
Led by Derrick, the Global Markets research team comprises Jiangang Duo, Thomas R. Hoge III, Neil Mellor, Samarjit Shankar and Michael Woolfolk.
Brown Brothers Harriman
Brown Brothers Harriman, the oldest and largest partnership bank in the US, is a leading FX provider to asset managers in developed, emerging and restricted markets. Much of the focus in 2012 was on emerging markets currencies.
Marc Chandler, global head of currency strategy, says: “A good deal of our research in the emerging markets focused on Asian and Latin American currencies.” Over the past year, BBH developed new approaches to trading FX in markets with currency restrictions, as a result of its relationship-driven approach.” This has resonated very well in the market, proof that investors are looking for another level of choice for their executions,” Chandler says. “Our approach is to provide our global clients with consistent and seamless FX trading coverage complemented with our global research team. Despite the changes in technology and market conditions, we continue to find that the old tried-and-true values of relationship excellence and thought leadership are as vital as they have ever been.”
The bank’s analysts provide three daily comments on the FX market, as well as in-depth weekly and quarterly reports with a longer-term outlook. BBH’s currency strategists also provide comments throughout the day on data releases, speeches by important officials and significant currency movements.
BNY Mellon Global Markets offers a multi-asset product, iFlow, which provides data and analysis of cross-border investment activity. With $27.9 trillion in assets under custody and administration, BNY Mellon is uniquely positioned to provide its clients with analyses of the currency markets and global investment flows.
In early December, for example, the iFlow FX indicators showed a strong renewed surge in net buying in the dollar to twice the average flows witnessed over the previous year. This indicated that a significant number of investors were looking beyond the US fiscal-cliff negotiations at the time and positioning themselves for a risk rally following a resolution of the issue.
The iFlow product tracks daily investor activity across currencies, equities and bonds in developed and emerging markets. Decision-support tools are available to help clients develop trading strategies. These include historical charts with trend lines, trading signals and data on simulated portfolio performance. The product was updated in 2012 with new features, including an investment heat map, cumulative comparative flows and flow movers, making iFlow more interactive and easier to interpret.
Deutsche Bank has worked with hundreds of major corporations, investors and hedge funds to develop strategy and hedging solutions to specific problems. It has created FX option strategies that allow investors to hedge credit risk, as well as FX volatility strategies to protect equity portfolios.
DB has helped US banks to modify eurozone capital positions using options to counter the potential negative effects on risk-weighted assets of a European crisis. Its dbOverlay product enables asset managers and companies to reduce the time and cost of hedging the currency risk on their overseas portfolios. The product allows clients to outsource all of their FX hedging to Deutsche Bank through a single swap agreement. Most derivative trades in 2012 were focused on the euro versus the dollar, which has risen and fallen with developments in the eurozone crisis.
BNY Mellon makes monthly forecasts on quarter-end price levels in 70 currency pairs. Its forecasts are based on economic and capital-flow fundamentals in the major currencies. Forecasts for emerging markets incorporate purchasing power parity and other currency-regime factors. The bank also uses a value-based process to identify currencies that are trading out of line.
BNY Mellon’s currency strategists write frequently updated blogs, including the Morning Update, which highlights news headlines and commentary. FX Comment provides commentary on breaking market events during New York trading hours. The iFlow Daily provides insight into cross-border flow information.
In addition to the Global Markets website at gm.bnymellon.com, the research offerings—including iFlow—are accessible from the BNY Mellon Connect Mobile app for iPad and iPhone, the new Global Markets Portal and on Twitter @SJDerrick.