What is Carry Trading?

The term Carry trading unless otherwise specified denotes currency carry trading. Carry trading is one of the Currency trading strategies which is the most popular strategy currently being used by professional currency traders as well as less seasoned traders. The main reason why carry trading is gaining a pace is the interest rates differences existing in different countries. 

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Euro Improved Slightly as ECB, IMF Meets

Yesterday Euro recovered slightly against USD after the highest ever fall.

Markets are expecting some positive news from Jean-Claude Trichet, the President, European Central Bank & Dominique Strauss-Kahn the Managing Director of International Monetary Fund as they would address German Parliament today.

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South Korean Won drops on Reports that Finance Ministry to Intervene

South Korean won went down from a 19- month high against the dollar after the Government sources said that the gains were disproportionate and indicated that it may intervene. 

It is not clear whether the Bank of Korea would resort to buying or selling currencies on behalf of the Government as a part of intervention. 

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Greek Debt Crisis, New Zealand, Australian Dollars Fall

The New Zealand and Australian dollars plunged against the Japanese Yen due to concerns over European Union aid package for Greece. 

 

The New Zealand Dollar dropped against all major counterpart currencies post the reported news of German Chancellor Angela Merkel saying that she won’t release Greek rescue funds until the country shows protractible & convincing plan to cut its deficit. The Australian dollar also moved back from an 18-month high against the yen as majority of Asian stocks dropped. As per sources decision on aid for Greece would not be finalized till the time the International Monetary Fund works out a plan of cuts with the Government in Athens.

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Great Britain Pound Rises Against U.S. Dollar: An Effect of Rising Home Prices in U.K.

The pound appreciated against the U.S. dollar today due to continuous increase in U.K. home prices for consecutive ninth month, reinforcing the signs the economic recovery.
 

GBP advanced versus almost all of its most-traded counterpart currencies after Home track Ltd. said the average cost of a home has been increased from March.

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South Korean Won Rises to 19-Month High

South Korea’s won surges to a 19-month high as a result of funds poured in by global investors into the nation’s shares to profit from speeding economic growth and increasing exports.

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US Dollar Strengthen due to Reduction in Carry Trades

 The profits from carry trades have been reducing as the interest rate differences among Central Banks are disappearing. Falling demand for swing trades would help the dollar which is a favorite for funding the trades due to record low U.S. rates to continue the rally that resulted into 12 percent up than Euro in recent past.

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Japanese Yen (JPY) Depreciates Aganist USD

Today the US dollar appreciated against JPY due to signs of global economic recovery.The gush in U. S. housing market is also one of the reasons for the rise.

The JPY depreciated against most of the currencies as central banks indicate that they will increase interest rates to control rising inflation. In recent past most of the global currencies were not able to attract the attention due to unfavorable economic conditions & that was acting as a stimuli for JPY as comparatively it was an attractive currency. But as the U.S. & global economies are showing signs of recovery the JPY is bound to fall.

An Introduction to FX Options

FX or Currency Option is a financial derivative instrument under which the owner of the instrument gets the right but not the obligation to exchange one currency against another at a particular point of time in future at a predetermined exchange rate.

This predetermined rate is called as strike price or exercise price.

The market for FX Options is the largest & most liquid option market in the world. Most of the trading in FX Option happens in OTC (Over the Counter) markets & less regulated. A portion of the FX Option trading also happens on regulated exchanges like Philadelphia Stock Exchange, Chicago Mercantile Exchange and International Securities Exchange.

Example of FX Option:

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Japanese Yen (JPY) Rises due to Speculation about Goldman Sachs Case

The Yen rose against Euro for a second day due to the speculating investors buying move to protect against possible outcomes of the Goldman Sachs investigations. If the results of investigations go against Goldman Sachs this may cut off the Greece state aid package to Goldman Sachs.

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