January 15, 2020

FX Carry Trade 2019 Q4 Review

As part AtlasFX’s vision to protect multi-national corporations against the adverse impacts of currency volatility, we offer a quarterly update of the FX carry trade for a basket of selected currencies against the USD. (Please inquire for our studies related to other base currencies).

The chart below shows a retrospective look at the carry trade for Q4, 2019 (10/1/2019-12/31/2019). Plotted on the x-axis is the absolute value of the interest rate difference for the three month period. The y-axis shows the spot return of the foreign currency over the same time frame. The size of the bubble represents an estimate of currency size based on GDP. The bubble color signifies a long trade (green) or a short trade (red). Any trades above the diagonal line were profitable during the quarter. 


The data below shows a more detailed look at the results in tabular form.  The most profitable trade for the quarter was the Mexican Peso. Investors in that trade made 1.42% from the difference in the 3-month rates and another 4.27% in spot rate appreciation, a total yield of 5.69% over the period. A deeper look at the table shows that the profitability of the trades was mostly split between the shorts and longs. The U.S. Dollar depreciated against almost all of the currencies (except JPY), which added return to the long positions and eroded the returns from the short positions. Please contact us for more details on how AtlasFX can serve all of your foreign currency needs.

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