Carry trade is borrowing or selling a currency which has a low yield and reinvesting it in higher yielding currencies, bonds, stocks or other investments.
This is a highly speculative practice, which may give you a higher return if the currencies you chose do not strengthen.
But, the recent strengthening of the Japanese Yen and Swiss Franc which are the historical carry trade currencies may cause investors to exit from investments which could have an important impact on the financial markets.
Read more: Carry trade unwinding roils currency markets
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