Carry Trade : Simple

[GazFx]

UPDATE: Awaiting price continuation in AUDSEK and GBPTRY positions.

Total interest of $114.55 to date...11.45% return on deposit...199% annualised. The strategy is averaging 0.5% daily return, which seems very modest at first glance, however, when applied to larger deposits there is potential to earn a good weekly income. For example, a $20,000 deposit earns $700 interest per week; $50,000 earns $1,750 per week; $100,000 earns $3,500 per week. The risk, of course, is when price action moves against the position as with my AUDSEK and GBPTRY positions at present. The key is to ensure you are on the right side of the fundamentals, and in particular, on the correct side of the interest rate differential, as the currency with the higher interest rate is the one most likely to appreciate in value over time. During the interim you need to ensure that drawdown can be absorbed by deposit capital and/or accrued capital gains.

 

[GazFx]

UPDATE: AUDSEK buy swap reduced to zero.

Total interest of $122.20 to date...12.22% return on deposit...202% annualised. My broker reduced the buy swap rate on the AUDSEK to zero yesterday, so I am looking for best possible exit point, preferably at my take profit. Monitoring closely!

 

[GazFx]

UPDATE: AUDSEK positive swap reinstated. Swaps set to zero on all TRY pairs.

Total interest of $124.00 to date...12.4% return on deposit...196% annualised. An uninspiring week in which my positions have generally moved sideways, denying me the opportunity to set breakeven stop loss orders. My goal next week is to secure my positions in AUDSEK and GBPTRY with breakeven, or better still, profit lock stop loss orders, assuming opportunities arise. I am also looking for a downside continuation in the USDMXN, with a sell-stop set at 17.85000 (see chart).

 

[GazFx]

UPDATE: MXNJPY and USDMXN positions opened. GBPTRY positive swap re-instated.

Total interest of $130.43 to date...13.0% return on deposit...182% annualised. USDMXN sell-stop order triggered on price break below MA Low, and took advantage of a price break above MA High in MXNJPY pair to open long position. Will look to set stop loss orders today. See charts below.

 

[GazFx]

COMMENT: Why I remain bullish on the Mexican Peso and Turkish Lira.

MEXICO

• FEB 9, 2017: target for overnight interbank rate raised 50 bps to 6.25% to anchor inflation expectations and prevent a lower exchange rate from spilling over to consumer prices and raising inflation even further.
• Mar 30, 2017: target for overnight interbank rate raised 25 bps to 6.50% to anchor inflation expectations, ensure inflation converges to target, while taking into account higher US rates.
  
• May 18, 2017: target for overnight interbank rate raised 25 bps to 6.75% as risks to inflation deteriorate moderately.
• Jun 22, 2017: target for overnight interbank rate raised 25 bps to 7.00% follow the Federal Reserve's June rate hike but one member of the board voted to maintain the rate.

TURKEY

• Jan 24, 2017: overnight funding rate raised 75 bps to 9.25% and late liquidity lending rate raised 100 bps to 11% to contain deterioration in inflation outlook from lira depreciation.
• Mar 6, 2017: late liqudity lending rate raised 75 bps to 11.75% to contain deterioration in inflation outlook.
• Apr 26, 2017: late liquidity lending rate raised 50 bps to 12.25% to contain deterioration in inflation outlook. If needed, further monetary tightening will be delivered.

 

[GazFx]

UPDATE: AUDSEK and GBPTRY stop losses hit. Capital gain wipe-out!

Total interest of $131.68 to date...13.1% return on deposit...177% annualised. AUDSEK and GBPTRY stop losses have wiped-off $379.66 from the account, which includes a portion of accrued interest earnings. Closed P/L shows the account is still up $72.32, but with current Floating P/L at -$86.13, the account is currently down -$13.81 since start-up.

From a negative perspective, this account is right back where it started. From a positive perspective, original account capital remains intact and ready to fight another day. So, money management has done exactly as intended...provided capital protection. But, with the strategy focus being purely on swap interest earnings with little regard for capital gains, you would have to conclude that the strategy has failed in its present form to deliver acceptable results. There is a solid foundation, but no upper structure...no strategic tactics to target and capture capital gains along the way. This will be the subject of my next thread starting around mid July 2017...Tactical Carry Trade!

Why mid July? Because this weekend I fly to Sydney with my wife to board the Pacific Explorer for two-weeks cruising the South Pacific...a little winter warmth!

In the meantime I would love to receive any feedback and questions you may have...assuming anyone is actually following this thread. Bon Voyage!