Carry trade

Carry trades seek to make money from the fact that the interest rates set by central banks around the world vary considerably. In Japan, for example, the lending rate has been close to zero for some time and is still only 0.5% today – the lowest for any major currency – whereas in Australia it is 6.5% and in New Zealand 8%.

Investors seeking to exploit these differences typically borrow cheaply in Japan to fund investment in assets, such as bonds in the higher yielding currencies hoping to benefit from the large difference in interest rates. This works provided the yen doesn’t suddenly strengthen against the other major currencies. The effect would be to create large capital losses especially for investors who borrowed heavily to fund carry trading.

• See Tim Bennett’s video tutorial: What is the yen carry trade?

Paul Hodges: house prices could fall 50% in 'Great Unwinding'

Merryn Somerset Webb interviews Paul Hodges about deflation, the global economy's 'Great Unwinding', and how Britain's house prices could halve.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


27 January 1969: Students set up the LSE-in-exile

Students at the London School of Economics occupied the University of London Union building on this day in 1969, in protest at the erection of new security gates.