Despite the rise in volatility, across the world’s most important equity markets, carry trade returns have been relatively strong. Last week, the DailyFX Dynamic Carry Trade Portfolio was up by 472 pips and accumulated an additional $164 per basket on interest payments. The most lucrative trade was the position we held in the Sterling with 368 pips gain in capital appreciation plus $28 on interest payments. Looking ahead, we expect carry trade to gain the most from U.S. dollar weakness but the current degree of uncertainty in financial markets does not favor an excessive use of leverage. In fact, the S&P 500 Volatility Index, commonly known as the VIX, is trading at nearly 23 percent and we expect an increase of volatility over the next 30 days. Good Luck with your trading!
