Each week, a professional investor tells MoneyWeek where he’d put his money now. This week: Fadi Zaher, head of bonds and currencies, Kleinwort Benson.
Extremely low volatility in the currency markets has revived investors’ appetite for borrowing in currencies with low interest rates (such as the Swiss franc) and investing in ones with higher interest rates (the Australian dollar, for example). This is known as the ‘carry trade’.
In 2007, investors’ confidence in the carry trade was also high. But back then, many were caught off guard when the carry trade began to unwind, due to rising risk [...]
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