All corporates and asset managers hold cash balances, to cover upcoming outgoings and, in reserve, an excess balance, for example, in case of fund redemption. A corporate or asset manager will build excess balances as they randomly accrue in various currency accounts, we propose managing these cash balances in a more systematic way. As regular readers will know, C8 Hedge is designed to add value to the FX hedging process by modelling key drivers of FX markets: fundamental, trend, carry and value. Importantly, these key drivers can be just as easily used to optimise cash balances. Hold excess cash in currencies that are likely to appreciate on a total return basis (combining spot movement and interest carry).
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