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Forex pairs in this Article » EUR/USD, USD/JPY (London) - 2013 has seen a fairly strong year for Santa and his elves. Being based in Lapland, Finland, Father Christmas has been fairly untroubled by currency considerations. Assuming he is using euros as his reserve currency in line with his place of residence, he has not been hit by the currency volatility that troubled him in 2011-2012.

Given his currency exposure and the markets for his raw materials, Santa is largely naturally hedged. However, while some toys are made in-house, he also buys in finished products where the levels of expertise or the infrastructure and R&D costs make production difficult at his Lapland facility. As such, the measures taken by Chinese authorities that have weakened the renminbi as well as some loosening of trade restrictions have played into his hands and boosted the purchasing power of his euros.

EUR/CNY hit a low of CNY7.8319 on 10 July, around the same time that Santa and his elves begin their preparations for Christmas after a well deserved break. The euro has steadily climbed against the Chinese currency since this point. Santa’s organisation are secretive about their currency operations, however it is likely that he used some of the omniscience that allows him to know whether all the children of the world have been good or bad and employed it to predict the bullish euro trend to highs at CNY8.5940 in November and making use of this opportunity to place bulk orders from Chinese manufacturers in time for 25 December.

Father Christmas has also been lucky with his yen exposure, crucial for the release of the Sony Playstation 4 on 29 November. EUR/JPY has steadily climbed through 2013 with current record highs against the common currency at JPY142.85 helping to give Santa the purchasing power to deal with the huge volume of orders required in time for Christmas.

For in-house production, Father Christmas is obviously highly exposed to global commodity prices. Particularly to copper for electronics and oil prices for plastic production, which is now on-site enabling Santa to have greater control over quality and cut turnaround times.

Copper prices have seen a reasonably flat second half of 2013, after a steady decline in the first half and hitting lows around USD3,050 a tonne in June, at which point Santa probably entered the market, helping to provide some price support given the size of his positions.

Plastic production has also followed a similar trend, driven by Federal reserve tapering expectations, declining to a 2013 low of USD98.44 a barrel in March.

Taken as a whole, Santa has had a fairly robust year in 2013, particularly helped by his strong EUR position. As a result, he has been able to strengthen his cash position after a long period of volatility and also complete some infrastructure developments that had been put on hold due to post-2008 uncertainty.
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