Forex Investment and Currency Trading

Global markets are deleveraging. In the process there is distress selling. There is also a lack of differentiation. Currency positions are being unwound across the board. The main beneficiaries from these are the USD and the JPY and at least on the crosses the CHF. Tables have turned. And the once funding currencies of carry trades are staging a comeback. The biggest victims are the so called high yielding currencies. Currencies like the Australian dollar (AUD), Turkish lira (TRY), Brazilian real (BRL) and South African rand (ZAR) are under immense pressure, and are down by -20.97%, -21.20%, -15.53% and 28.90% respectively year to date through to 04 November. It was not that long ago that the Icelandic krona was one of the favourite carry trades in FX markets, and it is currently down by 50.70% year to date. Deleveraging is already taking place, at a breathtaking rate. Carry trades are under pressure. Foreigners are no longer so eager to borrow in JPY. Despite the rate of change, years of leveraging cannot be reversed in two months. The process of de-leveraging is nowhere near its completion. It is therefore difficult for one to expect carry trades gaining in popularity any time soon.