Welcome to DU!
The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards.
Join the community:
Create a free account
Support DU (and get rid of ads!):
Become a Star Member
Latest Breaking News
Editorials & Other Articles
General Discussion
The DU Lounge
All Forums
Issue Forums
Culture Forums
Alliance Forums
Region Forums
Support Forums
Help & Search
http://www.businessinsider.com.au/currency-market-carry-trades-sept-2-2014-9
...Steve Englander, Global Head of G10 FX Strategy at Citi, argues that every major foreign exchange trade in place right now is a carry trade.
Simply put, a carry trade is one where a trader sells one asset and uses the proceeds to buy another, in this case selling one currency to buy another.
Englander says these are the four trades currently in place:
In Asia, long CNH, short USD
In G3, long USD, short EUR and JPY
In G10 long AUD and NZD, short G3
Globally, long EM, short G3
As Englander sees it, there are five main risks to these trades. Among these risks is that the “yield advantage” — which is the reason why you’d put on a carry trade at all — is at multi-year highs when adjusted for volatility.
This chart from Englander illustrates this point nicely. The red arrows show the difference between what U.S. and Japanese treasuries imply the yen is worth against the dollar, with bonds implying the yen is worth about 110 against the dollar, while spot prices currently peg the yen at about 102...
...Steve Englander, Global Head of G10 FX Strategy at Citi, argues that every major foreign exchange trade in place right now is a carry trade.
Simply put, a carry trade is one where a trader sells one asset and uses the proceeds to buy another, in this case selling one currency to buy another.
Englander says these are the four trades currently in place:
In Asia, long CNH, short USD
In G3, long USD, short EUR and JPY
In G10 long AUD and NZD, short G3
Globally, long EM, short G3
As Englander sees it, there are five main risks to these trades. Among these risks is that the “yield advantage” — which is the reason why you’d put on a carry trade at all — is at multi-year highs when adjusted for volatility.
This chart from Englander illustrates this point nicely. The red arrows show the difference between what U.S. and Japanese treasuries imply the yen is worth against the dollar, with bonds implying the yen is worth about 110 against the dollar, while spot prices currently peg the yen at about 102...
Edit history
Please sign in to view edit histories.
Recommendations
0 members have recommended this reply (displayed in chronological order):
44 replies
= new reply since forum marked as read
= new reply since forum marked as read