Carry trade vs carry trader

Definition of 'Currency Carry Trade'

A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.

The best carry trade pair for example....... AUD/JPY ( i choose it among "common" currency pair & actually there are alot around there)

reason.......

1.Big Interest rate different


AUD=4.25%
JPY=0.1%

different 4.15%

AUD/USD
25%
because high diferent rate

USD= <0.25%'
AUD= 4.25%

different= 4%...

BUT....USD will no longer to be a low yield currency as time going on the FED will hike the rate and USD tend to be normal again......


how????

investor tend to buy yen or USD due to lower rate and invest in AUD curency due to higher interest rate(big profit).....(but soon not USD is not valid since FED will hike the rate)


and..i choose AUD/YEN to determine the movement of carry trade.......

but......due to recent yentervention..investor very cautious about the yen.....


so when the reverse carry of the yen will happen.....so that the yen movement volatility will back to normal....

still waiting....hehehhee

now very hard for Japan to change the last Yen carry trend since Ez crisis still not settle yet

Hi Krun,,

Good topic,


as we can see the best major currency (including NZD & CAD) to carry trade for now is CADCHF & NZDCHF with 1% daily yield.

And I assume they are the leading pairs on the foreign exchange market.

leading pairs because I assume many investors will put in the 'smart money' to these pairs

Hence, I will swing trade them.

On my watchlist:
CHF: NZDCHF; CADCHF
JPY: NZDJPY; CADJPY

Yeah right @remonpilip ,but you have to check your broker overnight rates too,as they always tend to diverge from real ones,and always on a negative tendency for us traders,in fact most of the times you 'll find your trade in carry debit,even if the overnight differential is positive and you should be getting credit insead.
This also discourages the arbitrage opportunities based on rates premium.
A little tip,don't focus only on carry differential but also the direction of this differential,try to download data for a pair and plot the price with the differential and you will see that on the chart.
The differential goes down,even if is poisitive the carry
Also the price goes down

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