The Future US Dollar Carry Trade

Most investors are familiar with the concept of the yen carry trade. It is where a trader will borrow say 1,000,000 yen from a bank in Japan at about a 1% interest rate. The trader then converts these yen into say US dollars and uses the dollars to buy bonds yeilding say 5%. Therefore the trader is looking at making a profit of 4% on his trade (5% - 1% = 4%).



This works well so long as the yen doesn't getter stronger against the dollar. Many professional currency traders would leverage their trade by say 10:1 and so make 40% profit instead of 4%.

The carry trade affects every area of the financial markets, including silver. Please read the full article by clicking here.