Been looking at carry trades again with all the rate changes happening.
Seems like the old reliable pairs aren’t working the same way they used to. The spreads keep shifting and central banks are being unpredictable.
Wondering if this strategy still makes sense for longer holds or if it’s become too risky.
Carry trades need stable, predictable rate gaps to work. Central banks are moving rates fast right now and changing signals every few months. This destroys the whole premise. You need months or years of steady policy to make real money with this strategy. Current volatility kills your interest income in days. Look for shorter-term plays where you can pivot quickly when policy shifts. Wait on carry trades until rate cycles settle down.
Still running carry trades but completely changed my approach these past couple years.
I used to park money in AUD/JPY and collect overnight interest. Got wrecked when BOJ started threatening interventions and RBA became unpredictable.
Now I’m pickier with entries and use smaller positions. Turkish lira pairs give decent carry but the volatility will destroy you if you’re not careful.
Having better luck with shorter carries - 2-3 weeks instead of months. Interest still adds up but I don’t get caught in major policy shifts.
Biggest lesson: watch forward rates closely. When they start pricing in rate changes, your carry advantage vanishes fast.
Been trading carry since 2016 - COVID changed everything.
Before, it was dead simple. Find high-yield currency vs low-yield, hold for months. Made good money on NZD/CHF and AUD/JPY.
Now I flip it. Sometimes I’ll take negative carry if I think a currency will rally hard enough to beat the interest cost. Did this with JPY pairs earlier this year when yen was beaten down.
Biggest change? Carry’s just one piece now, not the whole trade. I check technicals first, then see if carry helps or hurts.
Also watch what hedge funds do with their carry positions. When they start unwinding, you need to bail fast. Seen this happen whenever risk-off hits.
Still making money but it takes way more work now.
Yeah, the environment’s definitely different but carry trades are still part of my strategy.
I’ve shifted to targeting rate differentials that’ll stay stable for a few months instead of just chasing the highest yields.
Also started viewing the interest as a nice bonus rather than my main profit source. When volatility spikes, I’m not trapped holding losers just for the carry.
Carry trades still work, but you’ve got to pick different pairs now. AUD and NZD are too messy - their central banks can’t make up their minds. I’ve done well with USD/CHF and USD/JPY during Fed hikes. Time your entries right after rate decisions, not before. Stay away from emerging markets unless you like stress. Sure, the carry looks good until some political mess destroys months of gains in one day. Keep your position sizes sane and hedge your currency risk if you’re pulling serious carry income.
Works but swap rates change too fast now.
Central bank chaos destroyed most carry trades. I’m using shorter timeframes now and tracking bond yields instead of just rates.
Good breakdown of what’s happening with carry trades right now.