21st September 2010
The fast growth in currency trading since 2007 was revealed by a recent survey by the Bank of International Settlements, which confirms that investors have developed a great appetite for fast growing economies and those rich in commodities.
‘Carry' currency trading – a strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate – in particular has exploded, especially relating to the Australian dollar and a range of emerging markets.
But while the globalisation of investment portfolios has been a key factor in the stunning growth in currency trading volumes, Philip Poole, global head of macro and investment strategy at HSBC, points out that greater industrial trading between countries around the world, has also been behind the rise.
Against this backdrop and the current developments with the yuan and yen, investors could be forgiven for being somewhat bemused, unsure about what lies ahead.