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Carry Trades: Australian, New Zealand Dollars Rocket Higher as Japanese Yen Plunges on Return to Risk
Thursday, 16 October 2008 22:30:59 GMT  |  Terri Belkas, Currency Strategist
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Forex carry trades are inherently volatile but given the surge in the CBOE’s VIX Index to a fresh record high on Thursday, it’s obvious that the instability in the market has reached unprecedented levels.

However, only the most risky pairs in the forex market saw substantial price action: the high-yielding Australian and New Zealand dollars and the low-yielding Japanese yen. In fact, the yen plunged nearly 6 percent against Aussie and fell 4.57 percent versus Kiwi. What’s going on? Currently, risk trends remain the dominant theme throughout the financial markets, but we’re also seeing that lower liquidity is leading to wilder swings in almost every asset, especially those that tend to be more “speculative” instruments like emerging market currencies. This environment is unlikely to change anytime soon, making it increasingly important to know how to trade and survive in highly volatile markets.

Related Article: Japanese Yen Plunges As US Stocks Rocket Over 4% Higher

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