Is it a carry trade if i buy GBD/USD in the foreign exchange market and hold the position for at least one day
December 3rd, 2008
weng asked:
I have invested on forex market for a while and frequently heard about carry trade. As i know, this term means to buy in like Euro/Yen pair to profit from the difference between the two currency’s interest rate. The diffence in this pair’s interest rate is 3.5% now, but what about the GBD/USD pair which has only o.25% in difference?
Kansieo.com
I have invested on forex market for a while and frequently heard about carry trade. As i know, this term means to buy in like Euro/Yen pair to profit from the difference between the two currency’s interest rate. The diffence in this pair’s interest rate is 3.5% now, but what about the GBD/USD pair which has only o.25% in difference?
Kansieo.com
Kansieo.com
Any trade that involves borrowing money from one location at a lower rate than where it is being lent is technically a carry trade. Banks, pensions, and hedge funds will typically hold a carry trade for at least several weeks, but may hold it for several years (yen crosses are a good example), and have more interest in bidding on pairs with higher rate differences. Bottom line: yes, technically you are participating in a carry trade (but not a most desirable one).