In addition to our retrospective look at the carry trade, AtlasFX’s also offers a quarterly FX carry trade outlook for a basket of selected currencies against the USD. (Please inquire for our studies related to other base currencies).
The chart below shows a prospective look at the carry trade for Q2 2020 (4/1/2020-6/30/2020). Plotted on the x-axis is the three-month implied volatility of the pair. The y-axis plots the absolute value of the interest rate difference for the three-month period in absolute value terms. The size of the bubble represents an estimate of currency size based on GDP and the color of the bubble signifies a long trade (green) or a short trade (red).
The data below shows a more detailed look at the outlook in tabular form. The most attractive trade on an expected return per volatility basis is the Swiss Franc (CHF) with a 3-month interest rate difference of 0.5% and 3-month volatility of 4.0% yielding the highest ratio at 0.13. The Euro (EUR), Chinese Yuan (CNY), and Mexican Peso (MXN) are the next most attractive batch of trades. The Norwegian Krone (NOK) and Canadian Dollar (CAD) continue to bring up the rear since the interest rate differences are almost negligible to the US Dollar.