Quote:
Originally Posted by David Rodriguez
It's pretty clear that markets expect rate cuts from current high-yielders and mild prospects of rate hikes from low-yielders. This could be bad for the carry trade generally.
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Wow, the Aussie, a previous pillar of Carry Trade strength, has clearly taken a nosedive. A look at commodity markets and the Aussie yield curve can explain quite a bit of this, as the Aussie interest rate term structure shows clear expectations of Reserve Bank of Australia rate cuts through the medium term. Compounding Aussie woes, the benchmark CRB commodities index keeps taking a dive and shows little sign of recovery. More on the latter theme in a recent DailyFX report:
Why is the Australian Dollar Falling Sharply?
