Understanding Currency Overlay Strategy

Very Easy Currency Management Currency Overlay

A global investment managing firm is evaluating its approach to currency exposure management for international assets. The firm seeks to implement a strategy that allows it to enhance returns by actively managing currency risks separate from the underlying investment decisions. The firm is considering using a currency overlay strategy to achieve this goal.

Which of the following statements best describes the purpose of a currency overlay strategy?

To completely hedge out all currency risks associated with international investments.

To enhance returns by actively managing currency exposure independent of investment performance.

To replicate the currency exposure of the underlying international investments.

Hint

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