CSFB Recommends Basket FX Trade

  • 08 Jan 2001
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Credit Suisse First Boston is recommending that clients buy one-year dollar puts against a basket of currencies containing euro, Swiss franc, sterling, Australian, Canadian and New Zealand dollars. Kevin Chang, foreign exchange strategist in London, said it is recommending this trade because the bank expects the dollar to depreciate against the basket of currencies as the U.S. economy slows down. National Association of Purchasing Management manufacturing survey data released last week suggests the weakening is likely to continue, as the economy slows and interest rates fall.

CSFB is pitching the strategy with a maturity of between six months and one year because it believes there is room for a short-term correction in the dollar's recent weakening against the euro. CSFB forecasts euro/dollar at above parity, dollar/Swiss franc at CHF1.56, cable at USD1.45, dollar/Aussie at USD0.60, dollar/Canada at CAD1.45 and dollar/New Zealand at USD0.48 in 12-months.

In the middle of December Chang recommended a similar trade in which customers would buy a three-month at-the-money dollar put against an equally weighted basket of euro, yen, Swiss franc and Canadian dollar, which cost 2.22% of the dollar notional value with implied volatility of 9.42%. Plain-vanilla options would have cost 40 basis points more than an option on a basket of currencies because imperfect correlation across exchange rates lowers implied volatility. This basket had appreciated by 3.22% on Friday. Chang has taken yen out of the basket it is recommending now because CSFB thinks that it has already appreciated as much as it will.

  • 08 Jan 2001

All International Bonds

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1 Citi 31,385.40 114 7.52%
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3 Goldman Sachs 27,645.83 55 6.62%
4 Barclays 26,090.00 67 6.25%
5 Deutsche Bank 23,883.15 74 5.72%

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1 ING 767.18 3 9.30%
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3 UniCredit 735.89 2 8.92%
4 Santander 467.33 2 5.66%
4 SG Corporate & Investment Banking 467.33 2 5.66%

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Rank Lead Manager Amount $m No of issues Share %
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1 Goldman Sachs 1,607.28 5 20.37%
2 Credit Suisse 1,301.65 4 16.50%
3 UBS 970.80 3 12.31%
4 BNP Paribas 522.35 4 6.62%
5 SG Corporate & Investment Banking 444.17 3 5.63%