Andrew Krieger: The Kiwi Trade, $300 Million in Hours, and the Most Aggressive Currency Trader of His Generation

In late October 1987, days after Black Monday had erased over twenty-two percent of the Dow Jones Industrial Average in a single trading session, a thirty-two year old currency options trader at Bankers Trust named Andrew Krieger took aim at the New Zealand dollar. Using a trading limit that exceeded one quarter of his employer’s entire capital base, and applying leverage of up to four hundred to one through currency options, Krieger built a short position that, by his own subsequent claims, was larger than the entire money supply of New Zealand.

Within hours, the New Zealand dollar fell approximately five percent against the U.S. dollar. Bankers Trust’s New York currency desk netted approximately three hundred million dollars in profit. The Reserve Bank of New Zealand contacted Bankers Trust directly to complain that someone was attempting to collapse the country’s currency. Bankers Trust’s response, delivered in the bluntest possible terms, was that the position was not too large for Bankers Trust. It was simply too large for that market.

Andrew Krieger’s bonus for the trade was approximately three million dollars. Roughly one percent of the profits the trade had generated for the bank. He resigned the following year. Whatever Bankers Trust thought it was paying for, in Krieger’s view, it was not what one of the most consequential individual currency trades of the twentieth century deserved.

This is the story of how a Sanskrit and philosophy student from the University of Pennsylvania became the most aggressive currency trader of his generation. The man whose nineteen eighty-seven raid on the kiwi remains one of the largest single trades in the history of global foreign exchange, and whose career afterward illustrated both the rewards and the costs of operating at the edge of what individual traders are structurally permitted to do inside large institutions.

Sanskrit, philosophy, and Wharton

Andrew Krieger’s path to Wall Street was not the usual one. He attended the University of Pennsylvania as an undergraduate and majored in Sanskrit and philosophy. The combination is unusual in finance and worth pausing on. Sanskrit is one of the most grammatically intricate languages in human history. Philosophy, particularly the analytic and continental traditions Penn taught, demands precise reading of text, careful distinction between superficially similar ideas, and the intellectual discipline to follow arguments wherever they lead regardless of where you would prefer them to land.

None of this is obviously useful for currency trading. And yet, the same intellectual habits that produce careful Sanskrit translation and rigorous philosophical analysis turn out to be useful in a different way for high-stakes trading. The capacity to hold multiple competing hypotheses simultaneously. The patience to read primary documents carefully. The willingness to follow an argument to a conclusion that other people will find uncomfortable. These are not finance skills, but they translate.

After his undergraduate degree, Krieger went on to the Wharton School and earned his MBA. The transition from Sanskrit and philosophy to a top-tier finance MBA program is significant. It signals that whatever else Krieger was, he was also competent at quantitative work and willing to do the disciplined preparation that elite finance education demands. By the time he graduated from Wharton, he was equipped both with the intellectual tools of his earlier studies and with the financial training that would make him employable on Wall Street.

His first significant role was at Salomon Brothers, the firm that produced more elite traders of his generation than any other. Salomon in the early 1980s was the dominant force in fixed income and was building out its currency operations alongside the broader expansion of FX as a tradeable asset class. Krieger spent a relatively short period there, learning the mechanics of currency trading and currency options before moving to a firm where he could operate with substantially more institutional latitude.

Bankers Trust and the seven hundred million dollar limit

In 1986, Bankers Trust hired Krieger to run currency options. The decision to bring in someone with his profile was, in retrospect, characteristic of Bankers Trust’s culture in that period. The bank had a reputation for hiring aggressive traders and giving them unusual operational latitude in exchange for outsized returns on the bank’s capital. The strategy was risky. It paid off spectacularly when the traders were right and produced spectacular blow-ups when they were not.

Krieger’s trading limit at Bankers Trust was approximately seven hundred million dollars. The figure is worth pausing on. Most of the bank’s currency traders had limits in the range of fifty million dollars. Krieger’s limit was fourteen times larger. Reportedly representing roughly a quarter of Bankers Trust’s entire capital at the time. The bank had effectively given a single individual the latitude to take positions that, if they went wrong, could threaten the institution itself.

The seven hundred million dollar limit was an absolute notional figure. With currency options, the practical exposure was substantially larger. Krieger has discussed how, with one hundred thousand dollars of currency option premium, he could effectively control thirty to forty million dollars of underlying currency exposure. The leverage embedded in the options, multiplied by his already enormous trading limit, gave him exposure profiles that no other individual trader on Wall Street was permitted to run.

By the time of the events of October 1987, Krieger had spent approximately a year building a reputation at Bankers Trust as one of the most aggressive currency traders in the world. The reputation was not exaggerated. The trades that produced it had been verified through the bank’s own accounting. The seven hundred million dollar limit was not theoretical. He used it.

The setup before Black Monday

The New Zealand dollar, known to traders as the kiwi, had been a relatively new floating currency in 1987. New Zealand had floated the kiwi in March 1985, just over two years before the events that made Krieger’s name. From September 1986 through October 1987, the kiwi had rallied substantially against the U.S. dollar. By some measures, the kiwi had appreciated more than forty percent from its September 1986 lows to its October 1987 peak.

Krieger’s analysis, building over the months before the crash, was that the kiwi was fundamentally overvalued relative to the underlying economic position of New Zealand. New Zealand was a small, export-dependent economy with relatively shallow capital markets. The currency had appreciated on momentum and capital flows rather than on improvements in the country’s underlying fundamentals. In a normal market environment, the overvaluation might have corrected slowly through ordinary trading flows. In a stressed market environment, the overvaluation could correct catastrophically.

This is the part of the trade that gets less attention than the dollar amount but is the most analytically important. Krieger did not stumble into the kiwi short. He had built the analytical case over months. He had identified the fundamental overvaluation. He had identified the structural vulnerability of a small currency to large positions. He had identified the option structures that would let him size aggressively while limiting downside risk. The intellectual humility to spend months on analysis before placing a trade is the foundation that the dollar amount obscures.

What he was waiting for was the moment when the conditions aligned. He was looking for extreme volatility. Thin liquidity. Sentiment dislocation. He found all three on October 19, 1987.

Black Monday and the kiwi raid

Black Monday, October 19, 1987, was the single largest one-day percentage decline in the history of the Dow Jones Industrial Average. The index fell twenty-two point six percent in a single trading session. The cause has been debated by economists for nearly forty years, with no single explanation widely accepted. What is not debated is the consequence. Global markets entered a period of extreme volatility that lasted weeks. Liquidity in many markets evaporated. Sentiment shifted from the late-1980s optimism that had driven the rally to outright panic.

For most traders, Black Monday was a survival event. For Paul Tudor Jones and Peter Borish, it was a profit event because they had positioned for the crash in advance, netting approximately one hundred million dollars in profits. For Andrew Krieger, it was a setup event. The conditions he had been waiting for were now in place. Specifically, the kiwi had begun trading on momentum that had nothing to do with New Zealand’s fundamentals and everything to do with global capital flows seeking shelter from the dollar.

In the days immediately following Black Monday, Krieger built his short position. The mechanics involved currency options that gave him leveraged exposure to a kiwi decline while limiting downside risk to the option premium. The position size, executed across multiple counterparties to avoid telegraphing the full exposure, eventually reached a level that Krieger has subsequently described as larger than the entire M1 money supply of New Zealand. The claim is dramatic. It is also broadly consistent with the leverage embedded in his option structures multiplied by his seven hundred million dollar trading limit.

The execution itself was clean. Krieger has described his approach as combining careful sizing across the position-building phase with aggressive selling once the position was in place. The market, already nervous from Black Monday, responded violently. Within hours, the kiwi was down approximately five percent against the U.S. dollar. Some sources put the move higher, in the range of ten percent at peak. The position generated approximately three hundred million dollars in profit for Bankers Trust. Within hours.

The Reserve Bank of New Zealand

Officials at the Reserve Bank of New Zealand quickly noticed that someone was taking enormous positions against their currency. The pattern was unmistakable. The size of the moves, the coordinated nature of the selling across multiple counterparties, and the speed at which liquidity was disappearing in their currency all pointed to a single large trader operating with substantial leverage. The Reserve Bank’s concern was not just the immediate damage to the kiwi. It was the broader risk that the entire foreign exchange market for New Zealand could be destabilized in ways that would have lasting consequences for the country’s economy.

Reserve Bank officials contacted Bankers Trust directly. The complaint was that the bank’s positions were too large for the kiwi market. The bank’s response, attributed to senior leadership at Bankers Trust at the time, was unusually candid. They acknowledged that the position was not too large for Bankers Trust. They acknowledged that it was, however, too large for that market. The implication was clear. New Zealand’s complaint was not that Bankers Trust had violated any rule. It was that the country’s currency market was small enough to be vulnerable to a sufficiently aggressive position from a sufficiently well-capitalized counterparty. That was structurally true. It was also, from the perspective of the Reserve Bank, an unsustainable arrangement.

The episode contributed to a long subsequent debate about the structural vulnerability of small floating currencies to attacks by large speculators. The same dynamics would play out five years later in 1992 when George Soros and the Quantum Fund successfully shorted the British pound out of the European Exchange Rate Mechanism. The Krieger-kiwi episode of 1987 is, in retrospect, a precursor to the more famous Soros-pound trade. Both demonstrated the same structural insight. A sufficiently large position with sufficient conviction can move a currency through sheer mechanical pressure, regardless of fundamental considerations.

The three million dollar bonus

Krieger’s compensation for the trade was approximately three million dollars. The figure represents roughly one percent of the profits the trade generated for Bankers Trust. By any reasonable benchmark, the bonus was disproportionately small relative to the value created.

Krieger has discussed in subsequent interviews that the bonus was the proximate reason for his decision to leave Bankers Trust the following year. The deeper issue was structural. Bankers Trust had given Krieger enormous trading latitude on the explicit premise that the latitude would produce outsized returns. When the latitude did produce outsized returns, the bank captured the bulk of the value. Krieger’s incentive structure was, in his view, fundamentally misaligned. The economics of operating at his level of size and aggression inside an institutional balance sheet did not work for the trader, even when they worked spectacularly for the institution.

In 1988, Krieger resigned from Bankers Trust and joined George Soros’s Quantum Fund. The move was not arbitrary. Soros operated the most successful global macro fund of that era and had a compensation structure that captured a much larger share of trading profits for the individual traders generating them. Krieger spent a relatively brief period at Quantum before moving on to found his own firms.

One unusual coda to the kiwi trade has been documented in subsequent press coverage. After Krieger left Bankers Trust, dealers at other banks observed that his options portfolio appeared to maintain its value only as long as Krieger himself was managing it. The bank eventually had to restate its foreign exchange profits by approximately eighty million dollars after Krieger’s departure. The exact reason for the restatement has never been publicly resolved. The episode is a reminder that the value of complex options portfolios depends substantially on the analytical capability of the trader managing them, and that institutional accounting can struggle to mark such positions accurately when the original trader leaves.

Northbridge, the Money Bazaar, and the years afterward

After the brief Quantum Fund period, Krieger founded Northbridge Capital Management Inc. and Krieger and Associates Ltd. The firms operated as private investment vehicles focused on global currency trading. The performance record was not made public in the way that Bankers Trust era performance had been, partly because private fund returns are not reported through any equivalent of the World Cup Championship or the U.S. Investing Championship.

In 1992, Krieger published The Money Bazaar: Inside the Trillion-Dollar World of Currency Trading. The book is a detailed account of how the global foreign exchange market actually works, including the kinds of structural insights about leverage, liquidity, and central bank vulnerability that had informed the kiwi trade. The book is less of a memoir than Marty Schwartz’s Pit Bull and more of a textbook in narrative form. It remains one of the better introductions to the mechanical realities of institutional currency trading.

Krieger was inducted into the Trader Hall of Fame in 2005. He has continued to operate in various capacities in the currency and macro investing world, though his public profile has been modest compared to the years immediately following the 1987 kiwi trade. His exact net worth is not public information, though his ongoing involvement in hedge funds and private equity firms suggests it has continued to grow.

What Krieger actually got right

The temptation with Krieger is to see the kiwi trade as a one-time tour de force enabled by an unusual confluence of trading limit, market conditions, and personal aggression. The honest assessment is more structural. Several specific elements of Krieger’s approach generalize beyond the specific trade and are useful for working traders.

Use options for asymmetric leverage. Krieger’s preferred instruments were currency options, not spot or forward currency positions. The reason is mathematical. Options give you leveraged exposure to a directional thesis while limiting downside risk to the option premium. If the thesis is wrong, the loss is bounded. If the thesis is right, the upside is multiplied by the leverage embedded in the option structure. The structural asymmetry is the reason Krieger could size aggressively without taking the kind of catastrophic downside that an equivalent spot position would have carried.

Wait for the conditions before deploying conviction. Krieger had spent months on the analytical case for shorting the kiwi before the actual trade. What he needed was the moment when the conditions aligned. Black Monday and the days immediately following provided those conditions. The conditions specifically were extreme volatility, thin liquidity in the kiwi, and broader sentiment dislocation. The discipline to wait for high-conviction setups rather than trade through every market is the difference between traders who deploy edge effectively and traders who dilute their edge across too many marginal trades.

Size positions to the structural vulnerability of the target. The kiwi was vulnerable to large positions because it was a small currency with relatively thin liquidity. A position size that would have moved the U.S. dollar imperceptibly was capable of moving the kiwi by five to ten percent. Krieger sized the trade to the structural reality of the target market, not to a generic position-sizing rule. The lesson for retail traders is not that you can move major currencies. It is that you should think structurally about how your positions interact with the markets you are trading. Position size and market structure interact in ways that generic rules miss.

Recognize that institutional latitude is finite and conditional. The seven hundred million dollar trading limit at Bankers Trust was extraordinary. It was also conditional on continued performance and on the bank’s risk appetite remaining stable. Krieger has been candid that the latitude that enabled the kiwi trade was not something he could have replicated in a different institutional environment. The lesson for retail traders is that operational infrastructure matters. The constraints under which you trade shape what is possible to do, and changing those constraints requires changing your operational setup, not just your analytical work.

The institutional trade-off

Krieger’s career illustrates a structural tension that working traders should understand directly. To operate at the level of size and leverage that the kiwi trade required, a trader needs institutional infrastructure: capital, counterparty relationships, settlement capacity, regulatory cover. A retail trader cannot replicate those conditions, regardless of analytical skill.

The trade-off, however, is that institutional infrastructure typically captures the bulk of the value when the trades work. Krieger’s three million dollar bonus on a three hundred million dollar profit is the canonical example. The bank took ninety-nine percent of the value he created. Most institutional trading arrangements have similar economics, though the specific ratios vary.

For retail traders running their own capital, the equation is different. The size and leverage are smaller, but the trader keeps one hundred percent of the profits. The mathematical question is whether the smaller scale at one hundred percent capture is more attractive than the larger scale at one percent capture. For some traders, the answer is the institutional path. For others, including many of the most successful independent traders profiled in this series, the answer is independent operation at smaller scale with full ownership of the upside.

Krieger himself eventually moved in the independent direction, founding his own firms and operating outside the constraints of large bank capital. The career arc, in this respect, is not unusual. Many of the most aggressive institutional traders eventually conclude that the institutional capture of value does not justify the constraints, and move to independent operation.

What Krieger means for your trading practice

Krieger’s career, despite being centered on a single famous trade, contains lessons that translate directly to retail trading at every scale.

Mind. Conviction comes from preparation, not from confidence. Krieger spent months building the analytical case for the kiwi short before placing the trade. The aggression of the position was the visible peak of the iceberg. The submerged structure was months of careful work on the fundamentals of the New Zealand economy, the structural vulnerabilities of small floating currencies, and the option structures that would let him size to his analytical conviction. The trader who confuses confidence with conviction will size aggressively without doing the underlying work and will eventually blow up. The trader who does the underlying work first earns the right to size aggressively when the conditions align.

Method. Use the right instruments for the directional thesis. Krieger’s choice of currency options over spot or forward positions was not arbitrary. It was structural. Options gave him asymmetric exposure: bounded downside, multiplied upside. The discipline to think structurally about which instruments match your thesis is the difference between deploying edge effectively and overpaying for it. Most retail traders default to the most accessible instrument, which is rarely the optimal one for the trade in question.

Money. Position size to market structure, not to abstract rules. The kiwi was vulnerable to Krieger’s size because the market was structurally thin. The same dollar amount in a deep market like the U.S. dollar would have been imperceptible. The lesson is to think about how your positions interact with the markets you are trading. A small-cap stock, a thinly traded futures contract, an emerging-market currency, all behave differently under large positions than deep liquid markets. Sizing should reflect that structural reality, not a generic percentage rule.

The last word

Andrew Krieger is, at the time of this writing, in his early seventies and has been operating in various capacities in global currency and macro investing for over forty years. The kiwi trade remains the single most-cited episode of his career, partly because it was so dramatic and partly because it represented something new: an individual trader, operating with institutional latitude, executing a trade large enough to move a sovereign currency.

The trade itself was structurally enabled by a confluence of factors that have since become harder to replicate. Modern foreign exchange markets are deeper and more liquid. Central banks have developed better tools to monitor and respond to speculative attacks. Banks have substantially tighter risk controls and position limits. Algorithmic trading and faster information flow make it harder to build large positions without detection. The same trade today, executed against the same fundamental thesis, would face a much harder operational environment.

What Krieger leaves the working trader, however, is not the trade itself but the analytical framework underneath it. Patient preparation. Asymmetric instruments. Conditional execution. Structural thinking about how positions interact with markets. None of those elements depend on the seven hundred million dollar trading limit. They are accessible to retail traders working with much smaller accounts, and the arithmetic of how they compound over time is the same arithmetic that produced the three hundred million dollar profit in October 1987.

The kiwi trade is, in this respect, both unique and reproducible. Unique in scale. Reproducible in method. The trader who learns to internalize the method, even at retail scale, has access to the same structural edge that briefly made Andrew Krieger the most aggressive currency trader of his generation.

“We didn’t take too big a position for Bankers Trust. We may have taken too big a position for that market.” — Bankers Trust to the Reserve Bank of New Zealand, 1987

Frequently Asked Questions

Who is Andrew Krieger?

Andrew J. Krieger is an American currency trader best known for his October 1987 short position against the New Zealand dollar (the “kiwi trade”), which generated approximately $300 million in profit for Bankers Trust in a matter of hours. He studied Sanskrit and philosophy at the University of Pennsylvania, earned an MBA from the Wharton School, began his career at Salomon Brothers in the early 1980s, joined Bankers Trust in 1986, and resigned in 1988 after his bonus on the kiwi trade was reportedly approximately $3 million (roughly 1% of the profits). He briefly worked at George Soros’s Quantum Fund before founding Northbridge Capital Management. He authored The Money Bazaar in 1992 and was inducted into the Trader Hall of Fame in 2005.

What was the famous “kiwi trade”?

In late October 1987, days after Black Monday’s 22% Dow crash, Krieger built a massive short position against the New Zealand dollar through currency options. Using leverage of up to 400 to 1 and his $700 million trading limit at Bankers Trust, he constructed exposure that he has subsequently described as larger than the entire M1 money supply of New Zealand. Within hours of the position being deployed, the kiwi fell approximately 5% against the U.S. dollar (some sources report up to 10% at peak). The trade generated approximately $300 million in profit for Bankers Trust and prompted the Reserve Bank of New Zealand to contact Bankers Trust directly with a complaint about the position size.

Why was Krieger’s trading limit at Bankers Trust so large?

Krieger’s $700 million trading limit at Bankers Trust was approximately 14 times larger than the typical $50 million limit given to other currency traders at the bank, and represented roughly a quarter of Bankers Trust’s entire capital base at the time. The latitude was a function of Bankers Trust’s culture during the period, which favoured aggressive traders given unusual operational latitude in exchange for outsized returns on the bank’s capital. Krieger had built a reputation in his first year at the firm as one of the most aggressive currency traders in the world, and his trading limit was scaled to match that reputation.

Why did Krieger leave Bankers Trust?

Krieger’s bonus for the kiwi trade was approximately $3 million, representing roughly 1% of the $300 million in profits the trade had generated for Bankers Trust. He has discussed in subsequent interviews that the bonus was the proximate reason for his decision to resign in 1988. The deeper issue was structural: he believed the bank’s incentive structure for institutional traders operating at his scale of size and aggression was fundamentally misaligned. He moved to George Soros’s Quantum Fund, which had a compensation structure that captured a larger share of trading profits for individual traders.

What did the Reserve Bank of New Zealand do?

Officials at the Reserve Bank of New Zealand quickly noticed that someone was taking enormous short positions against their currency. The Reserve Bank contacted Bankers Trust directly with a complaint that the position was too large for the kiwi market. Bankers Trust’s reported response acknowledged that the position was not too large for Bankers Trust but conceded it may have been too large for that market. The episode contributed to a long subsequent debate about the structural vulnerability of small floating currencies to large speculative positions. The same dynamics played out more famously in 1992 when George Soros and the Quantum Fund successfully shorted the British pound.

What is The Money Bazaar?

The Money Bazaar: Inside the Trillion-Dollar World of Currency Trading is the book Andrew Krieger published in 1992 about how the global foreign exchange market actually operates. The book covers institutional currency trading, the role of currency options in achieving leverage, the structural vulnerabilities of central bank policy frameworks, and the dynamics of speculative attacks on currencies. Less of a memoir than other trading books, it functions more as a textbook in narrative form. It remains one of the better introductions to the mechanical realities of institutional foreign exchange trading.

How did Krieger use currency options for leverage?

Currency options gave Krieger asymmetric exposure: bounded downside risk equal to the option premium, with multiplied upside if the directional thesis was correct. Krieger has discussed how, with $100,000 of currency option premium, he could effectively control $30 million to $40 million of underlying currency exposure. Combined with his $700 million trading limit at Bankers Trust, the embedded option leverage allowed him to construct positions that, on a notional exposure basis, could be reportedly larger than the entire money supply of small currencies like the New Zealand dollar. The structural asymmetry of options was the reason he could size aggressively without taking unbounded downside risk.

Could the kiwi trade happen today?

It would be substantially harder. Modern foreign exchange markets are deeper and more liquid than they were in 1987, making it harder for any single trader to move major currencies meaningfully. Central banks have developed better tools to monitor and respond to speculative attacks. Banks have implemented substantially tighter risk controls and position limits that would prevent any single trader from operating at the size Krieger used. Algorithmic trading and faster information flow make it harder to build large positions without detection. The same fundamental thesis (a small currency overvalued during a global volatility event) could still produce a profitable trade today, but the size and speed of execution would face a much harder operational environment.