Comparing Strategic and Tactical Currency Management

ABC Investment Management is currently evaluating its approach to currency management in relation to its international equity portfolio. The management team is considering two overarching strategies: a strategic approach aimed at long-term currency exposure and a tactical approach that involves short-term opportunistic adjustments based on market movements.

As a senior analyst, you have been asked to provide a comprehensive analysis comparing strategic versus tactical currency management. Your analysis should include:

• The definitions and characteristics of each approach.
• The advantages and disadvantages of u\sing a strategic versus a tactical approach in currency management.
• Examples of situations when each approach would be most appropriate.
• Factors influencing the decision to use one approach over the other.

Please develop your essay to provide clear arguments and support your points with relevant examples and sound reasoning.