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21 Feb 2014
Flash: Carry trades to watch for - Rabobank
FXStreet (Gutemala) - FXStreet (Guatemala) - Rabobank strategists explained an FX carry trade is an often used strategy designed to profit from the interest rate differential between two currencies. In their outlook, they explained which pairs offer the best opportunities for carry trades.
Key Quotes:
“Certain currencies appear in the top five of both rankings. EUR/INR is the clear standout although EUR/TRY and EUR/IDR both look attractive as well”.
“If we incorporate our spot view then EUR/NZD would also be a top pick. Whether or not we think now is a good juncture to start looking at carry trades is another story. We would argue that 2014 is likely to be a very volatile year with Fed tapering, a Chinese slowdown and political risks all posing significant hurdles for high yielding currency performance. In this respect, we see FX volatility as rising across the EM space”.
“That said, if one is selective in their choice of carry cross, perhaps shorting EUR against a basket of INR, TRY, RUB and NZD then we see potential for profitable trades”.
Key Quotes:
“Certain currencies appear in the top five of both rankings. EUR/INR is the clear standout although EUR/TRY and EUR/IDR both look attractive as well”.
“If we incorporate our spot view then EUR/NZD would also be a top pick. Whether or not we think now is a good juncture to start looking at carry trades is another story. We would argue that 2014 is likely to be a very volatile year with Fed tapering, a Chinese slowdown and political risks all posing significant hurdles for high yielding currency performance. In this respect, we see FX volatility as rising across the EM space”.
“That said, if one is selective in their choice of carry cross, perhaps shorting EUR against a basket of INR, TRY, RUB and NZD then we see potential for profitable trades”.