Goldman Sachs indicates that Carry Trade is the most attractive investment option in over 20 years, recommending the use of the Japanese Yen as the borrowing currency.

Goldman Sachs indicates that Carry Trade has become the most attractive investment option in over 20 years, recommending using the Japanese Yen, Swiss Franc, or Euro as the cost currency to generate returns in the coming months.

On July 10, 2569 at 12.00:XNUMX p.m., Bloomberg News reported that Goldman Sachs states that the Carry Trade strategy, one of the most popular strategies in the global forex market with a daily trading volume of over $9.5 trillion, is experiencing its best support in over 20 years. Due to the wide interest rate spread and low currency volatility.

Stuart Jenkins, a strategist at Goldman Sachs. specify that Carry trade investments in the major currencies of developed countries (G10) are more attractive than ever since 2543. In the coming months, the bank recommends using the Japanese yen, Swiss franc, or euro as the funding currency before investing in higher-interest rate currencies to profit from interest rate differentials.

Goldman Sachs views the attractiveness of carry trades as stemming from several factors, including the fact that interest rates in major economies remain high but vary widely, creating attractive yield spreads for investors. At the same time, financial market volatility has decreased to low levels, with the JPMorgan Currency Volatility Index near its lowest level since 2563.

Bloomberg data indicates that carry trade in the G10 currencies has yielded an average return of approximately 8% since the beginning of the year, which is higher than investments in global bonds, gold, and Bitcoin, although still lower than the stock market.

Goldman Sachs states that the stabilization of interest rates in developed countries and the limited likelihood of monetary policy adjustments by most central banks have reduced exchange rate volatility, making carry trade potentially profitable in the current environment.

However, Goldman Sachs warns that carry trade remains risky because, while investors receive gradual returns from interest, volatile short-term currency movements could lead to significant losses and rapid sell-offs, further increasing market volatility.

Barclays commented that the current calm in the financial markets may not reflect the uncertainty of the global economy, and there is a possibility that currency volatility will increase again in the near future.

Currently, the yield on 2-year US Treasury bonds is above 4%, while Germany's is below 3%, Japan's is only 1.4%, and Switzerland's is around 0.1%. This results in a wide interest rate differential among developed countries, a key factor supporting the Carry Trade strategy.

Goldman Sachs also views the yen as the most suitable currency for long-term borrowing, as it remains near its weakest level against the US dollar in nearly 40 years and is expected to continue weakening if economic fundamentals remain unchanged.

Additionally, Goldman Sachs recommends investing in the US dollar against the Swedish krona (USD/SEK), as well as the euro against the Swiss franc (EUR/CHF) and the Australian dollar against the New Zealand dollar (AUD/NZD), which they view as currency pairs offering worthwhile returns from carry trades given the current level of risk.

refer : bloomberg.com

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