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
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
Bismillah