With all of the talk surrounding the superfund that will help in case of another credit crunch, it tends to evoke memories of Augusts’ volatility. The reality is that measures of volatility are starting to move higher, and so as Michael pointed to on his post about the British pound carry against the Japanese yen, it may pay to be a little leery.
In spite of the Fed rate-cut, the three-month LIBOR has really failed to respond. At this point with the concern over the banking sector, oil nearing $88, lower U.S. corporate earnings, and other factors that may hinder growth, it could
create an environment where investors may be a little more tepid to take risk.
The following is a comparison chart with many of the popular carry trades and the weakness they’re showing today.
A companion to the Investools FX education 