The carry trade shows best returns

James came to these conclusions by using historical data to recreate the returns of simple systematic trading models from 1990 until the present. She then compared performance against a Center for International Securities and Derivatives Markets (CISDM) returns index. She compared a standard moving average trend model, an options model selling low volatility and a carry model that takes higher positions in high-yielding currencies against lower-yielding currencies.

"Every time carry trade models start to lose money, everyone starts worrying that they'll never work again, but this study anticipates continued returns," she said, adding that FX options models have continued to deliver positive returns, but delivered flatter results recently due to reduced volatility.

Even when currency pairs, including emerging market pairs are viewed separately, James said the carry model still performs well. "All currencies have made money on the carry trade model and over time it is proving itself to be reliable," she said, adding that recent returns have been stronger than longer term returns.

James said that long-term currency strategies are also offering steady returns, at least comparable with traditional investment and asset classes. She also said that returns since 2001 suggest best value lies in some of the more innovative strategy types such as flow and option trading.

Long-term systematic trend models are suffering most in today's markets, showing overall losses since 2001, James said, adding that EUR/JPY – once the most profitable of the trend currencies – is now much slower.