Insights

The dollar outperformed most of its major peers in May, although trading was volatile due to shifting headlines surrounding the Middle East conflict. The greenback weakened during periods of peace hopes but recovered when oil prices rebounded on reports of renewed strikes and supply risk concerns. Nonetheless, the hotter-than-expected inflation data for April allowed market participants to maintain Fed hike bets even during periods of truce optimism.

The yen was among the main losers, with dollar/yen hitting 160.00, despite intervention attempts and repeated warnings from Japan’s finance ministry. The BoJ is expected to hike in June, but a strong signal of subsequent hikes may be needed for the yen to stage a strong recovery.

Gold came under pressure from rising Fed tightening bets, falling below the $4,500 level. The metal failed to sustain gains during geopolitical de-escalation phases and remained sensitive to renewed tensions and higher yields.

The IXI strategy performed well in a challenging market environment marked by heightened volatility following direct intervention by the Bank of Japan in currency markets. In anticipation of further policy action after the initial intervention at the end of the previous month, we reduced risk and adopted a more defensive stance. This positioning proved beneficial when Japanese authorities intervened again on 6 May, limiting the strategy’s losses to a modest and short-lived drawdown. Thereafter, performance recovered quickly and strengthened throughout the month, with gains accumulating as market conditions normalized. The strategy maintained this positive trajectory through the month-end, ending the period with a profit.