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What do you think about carry trade?

 
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Author What do you think about carry trade?
kesizewi
White Belt
White Belt


Joined: 20 Jan 2018
Posts: 1

Post: #1   PostPosted: Fri Mar 30, 2018 3:55 pm    Post subject: What do you think about carry trade? Reply with quote

Hi everyone,

Carry trad is one of the most known and used in the world of finance.
Most institutional and management companies have recourse.
Indeed, this is a simple way to make money.
The technique of carry trade is: It is to borrow in currencies with low interest rates (see rate table) and to invest funds borrowed in a currency whose interest rate is higher. This is done to take advantage of the difference between the rate of two currencies, the so-called interest rate differential.
So i'm asking you, what do you think about this technique?

Please help.

I did not find the right solution from the internet.

References:-
https://bit.ly/2GGzER2
Medical product video

Thanks
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pkholla
Black Belt
Black Belt


Joined: 04 Nov 2010
Posts: 2889

Post: #2   PostPosted: Mon Apr 30, 2018 3:38 pm    Post subject: Reply with quote

Hi kesizewi
1 If you had borrowed at 3% (say) in US when Modi elected, Rupee at 54-55 and brought to India, invested at say 7-8% and found Re $ shooting up to 68 and even now 66 >>> the extra interest you earn is more than compensated by fall in Re vis a vis dollar???
2 Why people are investing at NEGATIVE interest in Switzerland??? Because even if Swiss banks levy penalty on deposit, rise in Swiss Franc compensates the depositor!
3 Many Indian corporates borrowed overseas at low interest rates and found that $ 1= Rs 40 had become $ 1 = Rs 50 by the time they repaid! In Bombay language they were "GONE FOR TEA"!
4 Even worse, many smart bankers sold options to these people to "protect" the currency rate from fluctuations. Many covered wrong way AND DOUBLED THE LOSS apart from option charges!
Beware, currency speculation is not for faint hearted. You also need deep pockets. Trading currency on foreign web sites is an offense for which you can be jailed
English banker in Singapore who single handedly brought down 200 year old Barings Bank (google it) with excessive option speculation, probably in 2008? He was currency trader!
Jai Hind, Prakash Holla
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