Excerpt from: Forex Training
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| August 13, 2008 | | The carry trade in currency trading | One of the forex trading terms you are most likely to run across while reading currency market news is "carry trade."
Carry trade
The carry trade is one of the most popular -- and risky -- moves available to those who engage in forex trading. The trader borrowers a low yielding currency to fund the purchase of a higher yielding currency. Money is made on the interest rate differential.
One of the most popular subjects of the carry trade is the Japanese yen. The yen carry trade is very popular because the yen has a low yield. It is often paired with a very high yield currency, like the Aussie, kiwi or UK pound.
However, as these higher yield currencies start cutting interest rates due to economic troubles, the yen carry trade will unwind at a faster rate.
| Topic Tags: carry trade unwind, currency, currency market, currency market news, currency trading, forex trading, forex trading terms, yen carry trade | |
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