The Synthetic Currency Positions Strategy enables traders and decentralised finance (DeFi) investors to take long or short positions on fiat currencies using synthetic assets rather than traditional forex brokers. This approach recreates global currency exposure — such as EUR, JPY, or GBP — using on-chain synthetic tokens, allowing for 24/7 trading, full decentralisation, and customised macro positioning across economic cycles.

This strategy is ideal for macro traders, yield-seekers, DAO treasuries, or portfolio managers looking to manage fiat exposure, hedge risk, or generate FX-based returns in a permissionless, composable way.

What Are Synthetic Currency Positions?

A synthetic currency position involves holding or shorting a synthetic version of a fiat currency, such as jEUR (synthetic euro) or sJPY (synthetic yen), in order to simulate exposure to that currency’s performance against the US dollar or other benchmarks.

These positions are created using DeFi protocols like Jarvis Network, Synthetix, and Kwenta, which issue tokens that track real-world exchange rates while being fully backed or collateralised on-chain.

Examples:

• Long jGBP = bullish on the British pound relative to USD
• Short sJPY = bearish on the Japanese yen vs stablecoin base (e.g. sUSD, USDC)
• Long jEUR / Short jCHF = long EUR/CHF cross rate

How to Construct Synthetic Currency Positions

1. Choose Your Synthetic Currency

Synthetic fiat tokens include:

• jEUR / jJPY / jGBP / jCHF / jCAD / jAUD (Jarvis)
• sEUR / sJPY / sGBP / sCHF (Synthetix)

These are pegged 1:1 to real fiat currencies and available on decentralised exchanges or liquidity pools.

2. Determine Your Trade Direction

Decide whether you’re:

• Long a currency: buy the synthetic token (e.g. jEUR)
• Short a currency: sell the synthetic token for a stablecoin or opposing fiat (e.g. jJPY → USDC)

You can also simulate cross-currency trades by taking opposing positions in two synthetic tokens.

3. Allocate Capital and Monitor Pegs

Ensure that:

• Your exposure aligns with macro trends (e.g. ECB vs Fed policy)
• The synthetic currency maintains a stable peg
• You track price through DEX aggregators or FX dashboards

Strategy Examples

Long Synthetic Euro (jEUR)

Macro thesis: Expect ECB rate hikes or USD weakness
Trade: Buy jEUR with USDC or DAI
Goal: Profit from euro strength relative to dollar

Short Synthetic Yen (sJPY)

Macro thesis: Expect BoJ to maintain ultra-loose policy while Fed tightens
Trade: Sell sJPY for sUSD
Goal: Benefit from yen depreciation

Long GBP/CHF Synthetic Cross

Macro thesis: UK macro stabilising while Swiss franc rallies fade
Trade: Long jGBP, short jCHF
Goal: Replicate traditional long GBP/CHF FX position

Yield Integration

While holding synthetic currencies, you can also:

• Provide liquidity to jEUR/USDC or jGBP/DAI pools on Curve or Uniswap
• Stake or vault tokens on Jarvis, Beefy, or Enzyme for extra yield
• Lend or borrow against synthetic positions to create leveraged strategies

This transforms your directional trade into a yield-bearing asset.

Risk Management

• Peg deviation risk if synthetic assets drift from 1:1 exchange rates
• Smart contract risk depending on protocol used
• Liquidity risk for less commonly traded currencies
• Macro reversal risk if the underlying economic trend shifts

Use portfolio tracking tools like DeBank, Zapper, or Dune dashboards to manage exposure in real time.

Advantages of Synthetic Currency Positions

• Trade major FX trends fully on-chain
• Avoid traditional broker fees and restrictions
• Customisable macro exposure 24/7
• Can be hedged or yield-enhanced
• Ideal for stablecoin diversification or treasury allocation

Conclusion

Synthetic currency positions unlock decentralised access to the global forex market, enabling anyone to trade, hedge, or invest in fiat currency trends using on-chain instruments. Whether you’re speculating on euro strength, hedging yen exposure, or building a diversified DeFi treasury, synthetic FX tools offer flexibility, transparency, and innovation not possible in traditional systems.

To learn how to construct, automate, and manage synthetic FX portfolios in DeFi, enrol in the expert-led Trading Courses at Traders MBA.