Has 2023 been the golden year for the carry trade? Commerzbank economists analyze the performance of the strategy.
2023 was quite disappointing from a carry traders’ point of view
2023 was quite disappointing from a carry trade traders’ point of view. The evolution of exchange rates did not provide any returns. High-yielding currencies did not appreciate against low-yielding ones. The performance was solely due to the rate advantage.
I don’t know any carry trader who relies on this strategy solely for the rate advantage. The expected gains from the exchange rate are always the most important argument. This means that the carry trade did not work as expected in 2023.
However, I agree with the competition that 2024 probably will not offer good carry trade performance. If central banks as a whole cut interest rates again, it will primarily be the more aggressive central banks that were quickest to raise as well. This means that currencies with the highest levels of interest rates will suffer the most.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
