Carry Trade Dims After RNBZ Cut

Just an hour after the RBNZ suprised the market with a 50 bp cut to the nation’s benchmark lending rate, the high and low end of the yeild curve have responded to the additional blow to expected returns in the carry trade. With volatility having already surged across the board this week, the blow to potential returns in these dangerous market conditions has further depressed interest in individual carry trade pairs and the DailyFX Carry Trade Index. The index was down 57 points to 26,275 - though it is still off two-year lows. Elsewhere, NZDUSD dropped below a 38.2% fib of a seven year trend, AUDUSD slipped below 0.80, and EURJPY pulled edged closer to 150.