News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
How Far Do the Yen, Euro and Dollar Crosses Run on Carry Tides?

How Far Do the Yen, Euro and Dollar Crosses Run on Carry Tides?

John Kicklighter, Chief Strategist

Talking Points:

• Risk aversion has kicked in, but Yen crosses in carry trade have been slow to fold to the pressure

• The Euro, Pound and Dollar have all taken relatively unfamiliar carry trade positions

• We look at the 'risk-reward' in some well-worn and relatively new popular carry trade pairs

See how retail traders are positioning in the majors on DailyFX or bring the figures to your charts using the FXCM SSI snapshot.

Risk aversion may not yet be a self-sustaining spiral, but the makings of a deeper deleveraging are evident. That said, a range of assets have seen significant depreciation already, while others have held resilient for some time. In the FX market, the Yen crosses - traditional fuel for carry trade speculation - have shown strong lag to more volatile and yield-intensive assets like high-yield and emerging market benchmarks. Meanwhile, the Euro has taken on the unusual role of a 'funding' currency to this same theme. These distortions are the result of competitive monetary policy which is more pronounced in FX markets. When will these buffers be overrun by speculative necessity? That will be determined in large part by the intensity of risk aversion and the expected capabilities of the world's central banks. Yet, no other measure will be more important than the level of exposure the speculative ranks hold to this increasingly risky position. While we can't measure it directly, we assess the FX carry's capacity and tipping point via its risk-reward in today's Strategy Video.

Sign up for John’s email distribution list, here.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES