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| Articles about Carry Trade |
| Trading Forex- Exotics As Carry Trade. | | 2008-06-12 01:23:41 | | The carry trade is an investment strategy involving basic arbitrage between interest rates. Any Forex transaction comprises of simultaneously selling one currency and buying another. Object of the carry trade is to sell a currency with a low interest rate and purchase one with higher interest rate. Trader pays interest on the sold part of the trade and collects it on the currency that was purchased, capturing the rate differential. This easy strategy has been a buzzword in Forex circles for many years. There are always differences in interest rates to be exploited and sometimes they are quite substantial. To make it more appealing, these imbalances can last for a long time, years even, making the carry trade a darling among the "easy money" crowd. Such was the case for JPY which had been heavily borrowed for years in order to buy NZD, AUD and GBP, until last summer. That's when the now famous "unwind of the carry trade" took place, sinking a lot of over leveraged traders.Since then fin | | By: Finance fantasy | | |
| | Forex Trading Term: Carry Trade | | 2008-04-19 18:42:59 | | What is a carry trade in currency trading?One of the most popular types of trades on the FX market is the carry trade. But was is a carry trade? It is important to understand this forex trading term.
A carry trade is carried out when, in currency trading, an investor takes a low-yielding currency and uses [...] | | By: Forex Bull | | |
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| Chinese Yuan Carry Trade Basket - December 4, 2007 | | 2007-12-03 23:19:39 | | This is an update on the performance of the Chinese Yuan Carry Trade Basket. The experiment was started with a base of $100,000 on March 20, 2007. I have included the performance figures for both of the experiments that I have been running, although they are the same in composition, I have leveraged them differently.
Since [...] | | By: TheFinancialWhiz.Com | | |
| | Chinese Yuan Carry Trade Basket Update - July 20, 2007 | | 2007-12-03 23:03:56 | | This is an update on the performance of the Chinese Yuan Carry Trade Basket. The experiment was started with a base of $100,000 on March 20, 2007. I have included the performance figures for both of the experiments that I have been running, although they are the same in composition, I have leveraged them differently.
Since [...] | | By: TheFinancialWhiz.Com | | |
| | Profiting From Carry Trade Candidates | | 2007-10-31 22:30:00 | | With the introduction of the carry trade into the mainstream audience, yen currency pairs have become the speculator's pair du jour. Currency crosses like the GBP/JPY and NZD/JPY have been able to net small intraday - or even longer term - profits for the currency trader as speculation continues to support the bid tone. But how can one enter into a market that is already seemingly overheated? Even if a trader could, what would be a good price, and doesn't everything that goes up come down? The answer is easier and simpler than most believe. In this article we'll show you how to use carry trades to profit from overwhelming market momentum.All About The Carry Trade First, let's take a look at the carry trade. In short, the carry trade is used when an investor or speculator is attempting to capture the price appreciation or depreciation in a currency while also profiting on the interest differential. Using this strategy, a trader is essentially selling a currency that is offering a relatively low interest rate while buying a currency that is offering a higher interest rate. This way, the trader is able to profit from the differential of interest rates.For example, taking one of the favored pairs in the market right now, let's take a look at the New Zealand dollar/Japanese yen currency pair. Here, a carry trader would borrow Japanese yen and then convert it into New Zealand dollars. After the conversion, the speculator would then buy a Kiwi bond for the corresponding amount, earning 8%. Therefore, the investor makes a 7.5% return on the interest alone after taking into account the 0.5% that is paid on the yen funds.Now on the earning side of the trade, the investor is also hoping that the price will appreciate in order to make further gains on the transaction. In this case, anyone that has invested in the NZD/JPY trade has been able to reap plenty of benefits. For 2007, not only were traders able to benefit from a 7.5% return, they also benefit from a currency tha | | By: FOREX ARTICLES | | |
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| Swiss Franc Trades Near Two-Month Low as Carry Trade Resumes | | 2007-09-19 13:22:44 | | By Kim-Mai CutlerSept. 19 (Bloomberg) -- The Swiss franc traded near a two- month low against the euro as investors returned to carry trades after the Federal Reserve cut interest rates by a half-percentage point.The Fed lowered its benchmark interest rate by more than economists had forecast yesterday, spurring stock markets and reviving appetite for riskier investments. The Swiss franc is popular among investors who borrow it at 2.75 percent to convert into other currencies that can be lent out at higher rates.``With the Fed looking like it's riding to the rescue for risk-takers by delivering more than expected with rate cuts, we can expect more of a return to the carry trade,'' said Martin McMahon, a currency strategist at Credit Suisse Group in Zurich. ``The Swiss franc is going to come under pressure.''Against the euro, the franc traded at 1.6499 by 11:30 a.m. in Zurich, from 1.6521 late yesterday, when it reached the lowest since Aug. 3. It was little changed at 1.1812 per d | | By: FOREX FEEDS | FOREX SIGNALS | FOREX E-BOOKS | | |
| | The Death of the Yen Carry Trade? Think Again! | | 2007-08-16 21:58:43 | | “When there is blood in the streets, it’s time to buy.” Obviously, this saying could not be any truer than the situation that investors all over the world are experiencing at the time of writing this post. Fear and risk grip the global marketplace in a way that hasn’t been seen [...] | | By: TheFinancialWhiz.Com | | |
| | Chinese Yuan Carry Trade Basket Update - July 3, 2007 | | 2007-07-03 23:39:15 | | This is an update on the performance of the Chinese Yuan Carry Trade Basket. The experiment was started with a base of $100,000 on March 20, 2007. I have included the performance figures for both of the experiments that I have been running, although they are the same in composition, I have leveraged them differently.
Since Inception (5 times leveraged basket):
Increase (decrease) in Account Balance: $9,569.53
Increase (decrease) in Unrealized Gains: $18,364.90
Increase (decrease) in Net Asset Value: $27,934.43
Total Portfolio Value: $127,934.43 +27.93%
Since Inception (10 times leveraged basket):
Increase (decrease) in Account Balance: $19,139.05
Increase (decrease) in Unrealized Gains: $36,729.80
Increase (decrease) in Net Asset Value: $55,868.85
Total Portfolio Value: $155,868.85 +55.87%
The Chinese Yuan Carry Trade Basket has been traded for over three months and has given an investor an annualized return of 97.09% and 194.20% respectively. While past performance i | | By: TheFinancialWhiz.Com | | |
| | Chinese Yuan Carry Trade Basket Update - June 7, 2007 | | 2007-06-08 02:10:38 | | Here is an update on the performance of the Chinese Yuan Carry Trade Basket. The experiment was started with a base of $100,000 on March 20, 2007.
Since Inception:
Increase (decrease) in Account Balance: $7,379.42
Increase (decrease) in Unrealized Gains: $12,751.94
Increase (decrease) in Net Asset Value: $20,131.36
Total Portfolio Value: $120,131.36 +20.13%
Although the Chinese Yuan has been gaining considerable strength over the past three months, declining about 1.31%, my belief is that the currency will tread water for now. The quick decline was due to political pressure placed on China to appreciate the Yuan. I have also been running the Chinese Yuan Carry Trade Basket at double the size of the positions as was presented in the original post. The performance of that fund is just two times the above performance figures. Please check back for further updates at a later time. I would appreciate any suggestions on improving the strategy.
| | By: TheFinancialWhiz.Com | | |
| | April 15, 2007 - Chinese Yuan Carry Trade Basket Update | | 2007-04-16 05:32:00 | | Here is an update on the performance of the Chinese Yuan Carry Trade Basket. The experiment was started with a base of $100,000 on March 20, 2007.
Since Inception:
Increase (decrease) in Account Balance: $2,646.52
Increase (decrease) in Unrealized Gains: $9,830.41
Increase (decrease) in Net Asset Value: $12,476.93
Total Portfolio Value: $112,476.93 +12.48%
Since Last Update on April 7, 2007 (One Week):
Increase (decrease) in Account Balance: $791.08
Increase (decrease) in Unrealized Gains:$3,830.41
Increase (decrease) in Net Asset Value: $4,621.49
The basket has been the beneficiary of deteriorating fundamentals of the US Dollar. All the positions in the basket are in profit, except for the the USD/CNY positions, which is our carry trade borrowing currency. Please check back for further updates at a later time. Please post any questions you may have.
| | By: TheFinancialWhiz.Com | | |
| | An Update on the “Chinese Yuan Carry Trade Basket Experiment” | | 2007-04-08 02:29:30 | | The success of this basket so far is exceeding my initial expectations. I have uploaded a spreadsheet of the account transactions, including interest payments, available for download if you wish to inspect the results. While the overall sentiment over the past few weeks (since March 20, 2007) has been bearish the dollar, I still feel that this basket can still continue similar returns in any currency environment. I am a bit disappointed with Oanda for increasing the interest rate at which an investor can borrow at in Chinese Yuan (Previously it was -1%; now it has increased to .5% for a total increase of 1.5%), but we can make due with what we have.
The results after two weeks:
Total Increase (Decrease) in Account Balance: $1,855.44
Total Increase (Decrease) in Unrealized Gains: ~$6,000.00
Total Increase (Decrease) in Net Asset Value: $7,855.44, or a 7.86% Return in Two Weeks
The 7.86% return in two weeks represents an annual return of 204.36% without compounding. Now the timing of the | | By: TheFinancialWhiz.Com | | |
| | An Update on the “Chinese Yuan Carry Trade Basket Experiment” | | 2007-04-08 02:29:30 | | The success of this basket so far is exceeding my initial expectations. I have uploaded a spreadsheet of the account transactions, including interest payments, available for download if you wish to inspect the results. While the overall sentiment over the past few weeks (since March 20, 2007) has been bearish the dollar, I still feel that this basket can still continue similar returns in any currency environment. I am a bit disappointed with Oanda for increasing the interest rate at which an investor can borrow at in Chinese Yuan (Previously it was -1%; now it has increased to .5% for a total increase of 1.5%), but we can make due with what we have.
The results after two weeks:
Total Increase (Decrease) in Account Balance: $1,855.44
Total Increase (Decrease) in Unrealized Gains: ~$6,000.00
Total Increase (Decrease) in Net Asset Value: $7,855.44, or a 7.86% Return in Two Weeks
The 7.86% return in two weeks represents an annual return of 204.36% without compounding. Now the timing of the | | By: TheFinancialWhiz.Com | | |
| | Chinese Yuan Carry Trade Basket - Interest Reinvestment Plan | | 2007-04-01 05:47:28 | | In the previous post entitled “Chinese Yuan Carry Trade Basket Experiment,” I described the basic composition of the basket of currencies in that post and this post I have set out to develop a plan to further take advantage of the interest that is received on the currency positions. I looked to a popular stock investment strategy, entitled DRIP (Dividend Reinvestment Plan), takes the dividends that a company pays on its stock reinvests the dividend into that company’s stock. The DRIP strategy runs off of the idea of compounding, where you are receiving dividends, reinvesting those dividends, and then earning dividends off of your initial investment plus the stock which was purchased in the reinvestment plan.
I am proposing using the idea of the DRIP strategy in combination with the carry trade basket so that the interest that is paid on the basket is reinvested equally over the entire basket, instead of different amounts being invested in the specific currency pair | | By: TheFinancialWhiz.Com | | |
| | The Chinese Yuan Carry Trade Basket Experiment | | 2007-03-24 07:35:07 | | After writing about the viability of a carry trade involving the Chinese Yuan, I got to thinking about how I could develop a basket of currencies to create a diversified carry basket involving a number of major and exotic currency pairs. This basket would seek to profit from the low volatility of the Chinese Yuan and from the large interest rate spread received for holding the USD/CNY.
In my previous post in regard to using the Chinese Yuan as a short, I illustrated the interest rate spreads with ten different currencies; I have taken those ten currencies and equally invested them against the Chinese Yuan.
The basket is currently set up to make approximately 38.05% in interest a year, at the current interest rates. At first glance the strategy may appear to be risky, but this basket is only leveraged at 5 times the balance. The asset allocations for the basket are below with unit values and approximate USD values. As you can see from the $100,000 basket, I am short $500,000 worth | | By: TheFinancialWhiz.Com | | |
| | Chinese Yuan: The New Carry Trade Choice | | 2007-03-20 18:58:16 | | *Please note (April 6, 2007): Oanda has recently updated their interest rate spread for the USD/CNY pair, it now yields 4.425%, instead of the previous 5.925%. While this does make this trade a little less attractive, using it in the carry basket should still provide substantial income generation over the next year.
As mentioned in my previous post in regards to the New Turkish Lira being the top currency choice to hold long in a carry trade portfolio, my new short position choice is now the Chinese Yuan. The FOREX broker that I use, Oanda, is currently offering an interest rate of 5.925% per annum to traders who hold the USD/CNY long, meaning long USD and short CNY. Even though the Chinese Yuan is currently being allowed to appreciate by its government, the Yuan has only appreciated against the dollar by about 3.6% over the past year. It is not in the best interest of the Chinese government to allow its currency to appreciate greatly against the other world currencies, especially t | | By: TheFinancialWhiz.Com | | |
| | The Turkish Lira Carry Trade: High Interest Rate, Stable Currency | | 2007-03-17 01:06:53 | | For the past few years, probably the most popular currency trading strategy is that known as the Carry Trade. Traders feel they are acting as banks, keeping the interest rate differentials by paying out lower interest rates (Borrowing) and bringing in money through higher interest rates (Lending). The best part about this type of trade is that you not only keep the interest rate differential, but you can also leverage that interest rate differential to create a pseudo-residual dividend payment.
The basic premise behind the carry trade is that in any FOREX transaction you are simultaneously selling one currency and buying another; therefore, you are simultaneously borrowing at one interest rate and investing at another interest rate. For example, we want to go long the US Dollar and short the Japanese Yen (a popular currency to short in a carry trade). We are, in fact, able to borrow our Yen at .8% and we are able to invest in US Dollar at 4.925%; thus, we are able to keep the interest | | By: TheFinancialWhiz.Com | | |
| | Yen Carry Trade - Two Different Points of View | | 2007-02-20 13:54:00 | | Views on the carry trade and the weak Yen are different among traders.David Andrew Taylor has an interesting point of view: The carry trade is said to be at around $1 trillion that the world knows about (perhaps another $1 trillion that we don't). That means that $1 trillion dollars have moved out of Japan in the form of borrowing from Japanese banks, and transfered out into other parts of the world and deposited earning higher interest rates.What would happen to Japan's economy if $1 trillion dollars were to all of a sudden show back up in Japan? Talk about liquidity. In fact, there would be so much money sloshing around, the Bank would have a hard time controlling these assets. You want to see inflation? Throw money at citizens like it's growing on trees. You want to see growth? Put suitcases of cash outside the bank's doors for businesses to walk by and pick up if needed. And, the yen would rise in response to this move.It's a really interesting way of seeing the situation. But if you turn the other way around, some clues on how a weak Yen is good for Japan start showing up.A weak Yen means that Japanese businesses are more competitive when exporting. Maybe that's exactly what they want - a weak currency so that Japanese companies can compete worldwide. Look at the situation in Thailand: they took desperate measures at the end of 2006 because of the stronger and stronger Baht that was hurting their exports. Businesses were the ones putting pressure on the national bank there to do something about their strong currency.UPDATE: Bank of Japan increased the interest rate for the Yen today, at 0.5%. | | By: DailyFX | | |
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