Should the Carry Trade Carry the Can?

This has been the question that many traders asked each other over the last few weeks. The Japanese Yen has risen strongly just as the stock market tumbles, causing many to question the role of the Yen in the recent stock market collapse writes Betonmarkets' Michael Wright. What is a carry trade? A carry trade is when a trader borrows from a currency where the interest rate is low, such as Japan and then converts it into a higher yielding currency such as USD, GBP or the CAD. The difference is called the carry. The trader is now able to invest those funds in either a treasury fund, or into something more risky and potentially higher yielding such as the stock market or hedge funds.