Global central banks competing to push their currencies lower and boost sluggish economies have opened up money-making opportunities for hedge funds this year.
Policymakers from Tokyo to London are freely printing money to lower the relative value of their currencies and make their exports more attractive.
Such overt policies have made hedge fund managers more confident in their bets on currency movements and are encouraging the kind of market volatility on which many of them thrive.
The Group of 20 states (G20) denounced competitive currency devaluations last month but stopped short of censuring ultra loose monetary policies that achieve the same result, irritating governments that do not want to print their way out of trouble.
Japan is planning tax hikes, high government spending and printing yen to combat the stubborn deflation that has dogged the country for decades, while the Bank of England has bought 375 billion pounds of UK government bonds.
Bank governors worldwide are pondering even more controversial methods to boost domestic money supply, making it yet more enticing for funds to wager on the eventual victors.
"One wonders if there is almost some behind-doors accord among UK and Japanese politicians," said Antony John, CEO at ECU Group, which manages currency exposures for companies.
"And when (deputy Bank of England governor) Paul Tucker comes out with talk about negative interest rates... you begin to wonder: 'Where will that settle?'," he said.
Sharp currency moves made some hedge funds tidy profits late in 2012 and into this year.
As well as bets on the direction in the value of the yen and pound, wagers on the euro rising versus the U.S. dollar proved a big earner in January as the debt crisis in Europe eased.
However, the same trade lost managers money in February as the euro tumbled in the wake of the Italian election stalemate.
After recovering ground last month, both sterling and the yen resumed their slide in March amid speculation that the Banks of Japan and England will seek a more aggressive depreciation.
Both now hover at year-to-date lows on a trade-weighted basis, making yet more money for bearish funds.
"We're quite sceptical about the UK economy... The economy is completely fragmented and the real estate bubble hasn't exploded," Noster Capital Partner Pedro de Noronha told Reuters.
He said that if sterling fell as low as $1.40 against the U.S. dollar - another 10 cent drop from its current level - then he may be tempted to bet on a recovery in the pound.
Pure currency-focused hedge funds represent a small segment of the overall industry, and many investors prefer to gain access to currencies by putting their money into macro funds, which make money from predicting how economic shifts affect asset prices.
Last year, investors ploughed $10.3 billion into macro funds, almost one third of all net new money to flow into the industry, according to industry tracker Hedge Fund Research.
New York-based Caxton, a global macro fund, posted a 3.9 percent gain in its flagship fund between January 1 and March 5, driven in part by a successful short on the yen.
The main fund at rival Tudor Capital is ahead by more than 5 percent to February 28, performance data seen by Reuters shows.
Elsewhere, Winton Capital, a $26 billion computer-driven 'trend-seeking' fund, had gained 4.2 percent in its Futures Fund by early March, buoyed by winning bets on currencies. The fund had a short position on the yen before December as the Japanese currency started its sell-off.
Earlier this week, London-based investment bank Daniel Stewart said it was launching a currency fund to help clients exploit opportunities thrown up by the economic volatility.
Japan's expansionist approach has also given funds another chance to play the "carry trade": borrowing in a currency yielding a low interest rate such as the yen to buy the return of a higher-yielding unit like the Australian or New Zealand dollar, and pocketing the difference as profit.
But after racking up gains on falls in the yen and the pound, some funds are growing cautious.
According to the Parker Global Currency Managers Index, the average currency-focused hedge fund fell 0.06 percent last month after gaining 1.42 percent in January - the biggest rise in 21 months - as the yen broke its fall against the dollar.
"With the yen, it's been a one-way street. But with other currencies I don't think the timing (of more monetary easing) is certain," said Roberto Botero, a director at Sciens Capital.
Botero said some pure currency funds were betting that currencies like the Colombian and Chilean peso and Korean wong would strengthen as their economies attracted more capital.
Brazil has also captured the eye of traders. It has taken bold action to devalue its currency to protect local exporters since Finance Minister Guido Mantega criticised rich nations for raising the spectre of a currency war in 2011.
Since then, the real has fallen 30 cents, or about a fifth, against the U.S. dollar but has strengthened so far in 2013.
M&G Investments Fund Manager Mike Riddell said smaller, export-dependent emerging Asian countries could suffer collateral damage as Japan drives the yen down at the expense of China, its biggest trade partner and global competitor.
"China's devaluation in 1994 is widely cited as being one of the triggers for the 1997 Asian financial crisis. If you consider that Japan is currently more important to many Asian countries' trade today than China was in 1993, could a big yen devaluation wreak havoc on the region in the same way?"
And although the economy in Britain continues to flounder, some managers suggest that a flare-up in the euro zone debt crisis could restore the 'safe haven' status of sterling.
"When people ask whether I think sterling is going to collapse from here, I answer by asking: 'against what'? Sterling has already collapsed in every true definition of the word," Michael Petley, chief investment officer at ECU, said.
(Additional reporting by Laurence Fletcher; Editing by Tom Pfeiffer)