Concerns about the political situation in Iran led to an increase in the dollar and the yen against the euro at the Asian auctions on Monday, as investors decided to convert part of the funds assets in the security zone. Japanese Yen is the leader for growth, as it added to the price to 16 major currencies.
The implicit volatility of options in the one-euro / yen rose to 17.5%, indicating a high probability of risk of significant currency fluctuations. This destroys the effectiveness of carry trade, so many investors reduced their positions before the open of this strategy. Recall that the essence of carry trade is to get into debt in the country where the lowest borrowing costs (Japan) and received further funds to invest in assets more profitable states (eg New Zealand, Australia). Strong fluctuations in the exchange rate between the two States could destroy all the potential profits from this strategy.
The implicit volatility of options in the one-euro / yen rose to 17.5%, indicating a high probability of risk of significant currency fluctuations. This destroys the effectiveness of carry trade, so many investors reduced their positions before the open of this strategy. Recall that the essence of carry trade is to get into debt in the country where the lowest borrowing costs (Japan) and received further funds to invest in assets more profitable states (eg New Zealand, Australia). Strong fluctuations in the exchange rate between the two States could destroy all the potential profits from this strategy.
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