Dollar Carry Trades outperfom

Investors reaped bigger gains since the start of June by funding investments in higher-yielding currencies with dollar-denominated loans than similar strategies using Japanese yen- or Swiss franc-based funding.

A basket of currencies including the legal tender of Australia, Canada and New Zealand and Brazilian real financed with U.S. dollars returned 7.8 percent since the start of June, compared with 2 percent when funded in yen and a loss of 2.5 percent in Swiss francs, according to data compiled by Bloomberg.

Expectations that the Federal Reserve will keep interest rates at record lows into next year combined with traders’ speculation that policy makers may be forced to resume buying securities to help provide additional stimulus to the economy makes dollar-based funding attractive. Carry trades financed in dollars and yen lost money in the first five months of the year, while the franc-funded trades returned 8.2 percent.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell