Street Signals
How Long Can Carry Remain King?
Mar 21, 2024
Exploring the current landscape of low FX volatility and carry trading strategies, with a focus on market dynamics, risks, and potential trade ideas. Insights on G10 currencies, emerging markets, stagflation risks, and a strategic trade proposal involving the Dollar Swiss.
19:44
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Quick takeaways
- Low FX volatility is driving interest in yield-seeking strategies, posing questions on carry's sustainability.
- Market imbalances from low volatility can spur excessive risk-taking, prompting vigilance for potential volatility triggers.
Deep dives
Current Trends in Volatility and Currency Markets
The podcast discusses the current trends in volatility, focusing on the impacts on currency markets and FX carry trading strategies. The host shares insights from the past when FX volatility markets were similarly suppressed, leading to carry seeking strategies. The Seavix, a measure of implied volatility in currency markets, is at historical lows, indicating the potential for continued low volatility. Factors such as FX Turbulence and positioning metrics suggest that the market environment is currently ideal for carry trades.
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