Monday, January 23, 2012

Euro carry trade

Draghi Makes Euro Favorite for Most-Profitable Carry Trades With Rate Cuts
By Masaki Kondo and Hiroko Komiya
Betting against the euro may be the most profitable trade in the foreign-exchange market as policy efforts to stave off a European recession debases the currency.
Borrowing in euros and investing in the currencies of Australia, Brazil, Mexico, South Africa and South Korea has returned 7.8 percent since the European Central Bank cut its benchmark interest rate on Nov. 3 for the first time in more than two years, according to data compiled by Bloomberg. So- called carry trades funded with yen have lost 0.3 percent and gained 1 percent when financed with dollars.
Comment: Remember: the yen also rises.

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