Carry Trades, Margin Rates and all the Fakes
Updated
For some strange reason the retail trade still appears to believe that the good old stand-bys are working as carry trades" ( AUDJPY , NZDJPY , GBPJPY , etc.) The fact remains that today, those don't even make the Top 5 of professional traders' (e.g., the industry) preference list.
Interest rate differentials combined with existing margin rates make most of the majors crosses a very unappealing proposition as far as carry trades are concerned. Because of this the industry has moved on, quite some time ago. (As is the nature of the present, speculative bubble.)
As for the top 5 of the majors, it's mostly about the US Dollar ;
1) USDCHF
2) USDJPY
3) EURUSD
4) NZDCHF (This one is likely to drop a few places, soon.)
5) CADCHF
Then, there is the rampant "interest" (i.e, speculation) in all things BRIC vs. G10, for reasons which should be self evident. (Interest rate differentials, capital flows, etc.)
I.e., MNX, CNH , BRL , ZAR , TRY versus the EUR, JPY and the USD.
Thus, if one happens to be looking for volatility and low-hanging fruit out there, these FX pairs are deserving a fresh look. (They are volatile, though thus, be prepared!)
Here is the "Central Bank Score Board";
------------------------------------------------
- Swiss National Bank -0.75%
- Bank of Japan -0.10%
- Federal Reserve 0.00%-0.25%
- European Central Bank 0.00%
- Bank of England 0.10%
- Reserve Bank of Australia 0.10%
- Bank of Canada 0.25%
- Reserve Bank of New Zealand 0.25%
- Central Bank of Brazil 2.00%
- Reserve Bank of India 4.00%
- Reserve Bank of Russian Federation 4.25%
- People's Bank of China 4.35%
Interest rate differentials combined with existing margin rates make most of the majors crosses a very unappealing proposition as far as carry trades are concerned. Because of this the industry has moved on, quite some time ago. (As is the nature of the present, speculative bubble.)
As for the top 5 of the majors, it's mostly about the US Dollar ;
1) USDCHF
2) USDJPY
3) EURUSD
4) NZDCHF (This one is likely to drop a few places, soon.)
5) CADCHF
Then, there is the rampant "interest" (i.e, speculation) in all things BRIC vs. G10, for reasons which should be self evident. (Interest rate differentials, capital flows, etc.)
I.e., MNX, CNH , BRL , ZAR , TRY versus the EUR, JPY and the USD.
Thus, if one happens to be looking for volatility and low-hanging fruit out there, these FX pairs are deserving a fresh look. (They are volatile, though thus, be prepared!)
Here is the "Central Bank Score Board";
------------------------------------------------
- Swiss National Bank -0.75%
- Bank of Japan -0.10%
- Federal Reserve 0.00%-0.25%
- European Central Bank 0.00%
- Bank of England 0.10%
- Reserve Bank of Australia 0.10%
- Bank of Canada 0.25%
- Reserve Bank of New Zealand 0.25%
- Central Bank of Brazil 2.00%
- Reserve Bank of India 4.00%
- Reserve Bank of Russian Federation 4.25%
- People's Bank of China 4.35%
Comment
Here are the current Risk On/Off properties of the Safe Haven FX pairs;
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