Quote:
Originally Posted by george65202
Hi, I've noticed that over the last several days, FXCM has appeared to drastically reduce the amount of carry trade interest it's paying on NZDJPY. It was about $1.40 plus or minus and couple cents per mini-lot per day for a long time, but recently, there have been some days where it pays $0.00, $1.00, or like today, $0.20. I haven't noticed anything like that with the other pairs...
What's going on?
|
It is going on with other pairs, but to less of an extent.
FXCM has a no dealing desk structure, so all orders are passed on to the intermarket to be executed against opposing orders (as opposed to a dealing desk where the broker will take the other side of your position and hedge it on their own terms).
Recently, their has been a crack down on speculation where central banks have temporarily raised overnight lending lending rates for those looking to borrow funds and lowered the return that can be received for providing those funds (this pans out to be a similar type of action as enacting the short sale ban on financial stocks on the same day the market was preparing for the quadruple witching hour). So, rolls are tightened as a natural reflection of market difficulties (rates have also been boosted by the natural glut of demand).
It was far worst last week, when panic was fully set in. Today things are much better compared to last week. However, there is still an issue with those pairs that have greater risk. NZDJPY is relatively illiquid and it has a very wide yield differential, so the effects of the higher lending rates will linger a little longer than those that are more actively traded.
