The HSBC Dynamic FX Index Series enables users to weight underlying currencies and to rebalance at short notice. The index can be used to hedge currency risk or to invest outright in a range of currencies, including the Chinese renminbi.
“We reference a framework of 42 currencies and gold against the dollar, with the ability to go long and short on a three-month forward rolling basis,” says Tamas Korchmaros, HSBC’s head of foreign-exchange indices.
The key differentiator of the HSBC indexes against peer counterparts is the bespoke nature of the offering, Korchmaros says. The index is denominated in dollars, with a weighting towards emerging markets. The underlyings are forwards and non-deliverable forwards.
Another application would be to replicate the country weighting of a given global equity or bond index, with the index mirroring changes in country allocations, providing a passive overlay strategy for asset managers looking to hedge equity or fixed income exposure.
The launch of the new indices builds on HSBC’s move into the currency benchmark arena late last year, when it launched its Single Currency series, each referencing one currency against the dollar, and Static Market Access Return Trackers (SMART) indexes. A new algorithmic index is planned for the coming months.
The bank is also selling a two-year medium-term note based on the new index, Korchmaros says.