EBC Markets Briefing | Swiss franc carry trades could blow up

The Swiss franc eased Tuesday, but as investors use it over the yen for carry trades, the risk of a rapid rally remains a constant concern.
EBC Financial Group | 795 hari yang lalu

The Swiss franc eased on Tuesday. As investors turn to the Swiss franc as an alternative to Japan's yen to fund carry trades, the risk of the currency staging one of its rapid rallies remains ever present.

Its appeal has brightened further as the yen's has dimmed. Yen carry trades imploded in August after the currency rallied hard on weak US economic data and a surprise BOJ rate hike.

The SNB was the first major central bank to kick off an easing cycle earlier this year and has cut interest rates twice. Analysts expect more reductions in the coming months as inflation kept grinding lower.

Speculators have held on to a $3.8 billion short position against the currency even as they have abruptly moved to a $2 billion long position on the yen, CFTC shows. Yet there are risks to take the bet.

Investors are prone to the influx into the currency when they get nervous, which was exemplified by its big gains amid market turmoil last month. The Swiss franc hit a record high around 180 in July against the yen.

The annual inflation rate in Switzerland stood at 1.3% in July 2024, in line with market expectations. Meanwhile, Japan swathe growth at 2.8% over the same period, remaining at its highest level since February.

The Swiss franc traded above 200 SMA against the yen with the initial resistance at 175. We see the pair likely consolidate around 172 in the short term, unless the Swiss data due later in the day surprise.

EBC Institute Perspectives Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC International Business Expansion or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

EBC Financial Group
Tipe: STP, ECN
Regulasi: FCA (UK), ASIC (Australia), CIMA (Cayman Islands), FSCA (South Africa)
baca selengkapnya
Stocks sink amid AI wipeout, dollar shines ahead of NFP

Stocks sink amid AI wipeout, dollar shines ahead of NFP

Nasdaq leads equity losses as AI outlook dims on fears of datacentre revolt. AI rout deepens in Asia but US futures point to some easing in selloff. Gold’s rebound hits a wall as traders turn to the safety of US dollar. Attention to turn to NFP report as December rate hike bets fade.
XM Group | 1 hari yang lalu
The dollar saves the day

The dollar saves the day

The dollar rebounds as the AI-driven S&P 500 sell-off boosts safe-haven demand, while the BoE’s first hike since 2023 fails to support the pound.
FxPro | 1 hari yang lalu
Tech Stocks Lead US Selloff Ahead of Payrolls

Tech Stocks Lead US Selloff Ahead of Payrolls

AI-related shares led the worst US equity session since 2020 as investors feared tighter oversight of AI and data-center buildout following the midterm results; Truist called it a “buyers’ strike in tech.” The selloff is spreading beyond Wall Street: Korean chipmakers fell about 10% before the open, the Kospi dropped below 5,000, CoreWeave’s five-year credit default swap widened to a record
ATFX | 1 hari yang lalu