South African Rand could be new darling of carry trades
Oct 24 (Reuters) -The South African could be the new darling of carry trades as it has strengthened significantly while other currencies used for such trades have suffered.
The purge of carry trades which have previously been much favoured began when Mexico's peso plummeted around the time of an election there. The situation worsened when the Bank of Japan announced changes to its policy and the reaction clearly shocked traders, with a big influence on sentiment.
Not only has the shock curbed interest in currencies that were preferred ahead of the purge, it has lessened the chance that Japan's monetary policy changes much or changes quickly.
With stock markets once again buoyant and FX relatively quiet, there is reason for traders to move back into yen-funded carry trades. The surprising performance of South Africa's rand, which hit a record low last month but has surged since as other risky currencies have dropped, is eye-catching.
Rand's rise makes it the focal point for carry trades for which it has the necessary qualifications, being one of very few free-floating and higher-yielding currencies that are widely traded.
While USD/ZAR has rebounded from this year's low in September at 17.0375 to reach 17.8625 this week, ZAR/JPY has stormed higher - gaining more than 10% from Sept. 11 to Oct. 23, going from 7.8500 to 8.6996.
There have been several recent buy signals including a Golden Cross when 55-DMA rose above the 200-DMA, which should encourage buyers expecting gains toward the next bull target at 9.0000, though the rise has much greater potential toward 10.
For more click on FXBUZ
ZARJPY https://tmsnrt.rs/3AfjwDR
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
