Global Macro Strategy: Interest Rate Differentials

Hard Hedge Fund Strategies Global Macro

Global macro hedge funds are known for employing strategies based on macroeconomic trends and shifts in economic policies across nations. These funds utilize a variety of instruments including equities, bonds, currencies, and commodities to capitalize on these macroeconomic movements. One significant investment thesis used by global macro hedge funds is the interest rate differential between countries.

Which of the following strategies best captures a typical global macro approach focusing on exploiting interest rate differentials?

Buying foreign currencies while selling the domestic currency to profit from expected interest rate hikes.

Investing in emerging markets fixed-income securities to capitalize on higher yields compared to developed markets.

Short-selling equities in countries with declining GDP while going long on currencies in countries with growing GDP.

Hint

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