Details

Autor(en) / Beteiligte

• Luca, Cornelius

Titel

Forex and the carry trade

Ist Teil von

• Futures (Cedar Falls, Iowa), 2011-09, Vol.40 (9), p.28

Ort / Verlag

Chicago: Alpha Pages

Erscheinungsjahr

2011

Quelle

EBSCOhost Business Source Ultimate

Beschreibungen/Notizen

• Carry trades always have been a popular strategy for forex traders. In a carry trade, traders sell currencies yielding low interest rates vs. currencies with a higher interest rate. These are medium- to long-term trades, as the spread between interest rates changes infrequently. Unfortunately, although simple in execution, a profitable carry trade is a bit more sophisticated than simply selling a low interest rate currency, like the yen, against a high yielder, such as the Australian dollar. The big risk in a carry trade is the quickly shifting appetite for risk. It is vital to remember that foreign exchange is the most immediate and successful shock absorber of international imbalances. Demand for high-yielding currencies vis-a-vis the low yielders only works when the appetite for risk is high. While the standard pairs for carry trades are either AUD/JPY or NZD/USD, all that is needed to form a carry trade is a low-yielding currency and a high-yielding one.