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Currency Carry Trades: The Role of Macroeconomic News and Futures Market Speculation

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  • Suk‐Joong Kim

Abstract

This paper investigates carry trade opportunities in major currencies against the US dollar over the period January 2, 1999 to December 31, 2012. There is evidence of significant Australian dollar (AUD), Euro, and Japanese yen (JPY) carry trades during noncrisis periods. The AUD (JPY) was an investment (a funding) currency, and the Euro was both. However, cross currency carry trades were not present. For the AUD and JPY, carry trades were more likely with low volatility and volume. Macroeconomic news that appreciate (depreciate) the AUD (the JPY) also stimulated the AUD (the JPY) carry trades. However, there is no evidence of meaningful and consistent impact of macroeconomic news on the EUR carry trades. For weekly horizon investigations, net long futures positions in the AUD promoted carry trades in the AUD and JPY. However, net long positions in the JPY only managed to reduce JPY carry trade probability. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 36:1076–1107, 2016

Suggested Citation

  • Suk‐Joong Kim, 2016. "Currency Carry Trades: The Role of Macroeconomic News and Futures Market Speculation," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 36(11), pages 1076-1107, November.
    • Handle: RePEc:wly:jfutmk:v:36:y:2016:i:11:p:1076-1107
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    Cited by:

    1. Lei Pan & Svetlana Maslyuk-Escobedo & Vinod Mishra, 2019. "Carry Trade Returns and Commodity Prices under Capital and Interest Rate Controls: Empirical Evidence from China," Monash Economics Working Papers 16-18, Monash University, Department of Economics.
    2. Ferry Syarifuddin, 2020. "Macroeconomic Consequences Of Foreign Exchange Futures," Working Papers WP/14/2020, Bank Indonesia.

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