Thought Leadership

Multicurrency Plus Strategy 3rd Quarter 2007

October 25, 2007

By the beginning of the 3rd quarter, we had positioned portfolios for a world in economic conflict.  As we explained in the 2nd quarter 2007 commentary, we believed currency markets would likely be caught in a tug of war between the forces of strong global growth outside of the United States, and growing concerns about the condition of America’s economy.  In this framework, our allocations to the Canadian and Australian dollars (natural resource-driven currencies) were designed to position the Strategy for the strong growth we expected outside of the U.S.  Our allocations to the Swiss Franc and the Japanese Yen (flight to quality currencies) were intended to insulate the Strategy from the volatility that we believed could be unleashed by a flight to quality event sparked by the U.S. housing crisis.  While our July 25th commentary did not suggest a financial panic would occur in August, we did observe the possibility of rising volatility, falling equity markets, and the probability that in such an environment, the Fed would no longer pursue