Forex Flash: AUD/USD recent low volatility makes it look good for a carry trade – TD Securities

FXstreet.com (Barcelona) - Current 5 year volatility lows for AUDUSD at 68 pips range on average for last 14 days, makes the pair more attractive for a carry trader, say at TD Securities. "Receding volatility has driven the attractiveness of the AUDUSD carry trade (that is, using the USD as a funding currency to buy AUD and pick up 200-300bps)," notes Singapore base analyst for TDS Alvin Pontoh, adding: "while yield differentials have by and large remained unchanged over this period."

"So while the potential gain of the AUDUSD carry trade is more or less the same as five months ago, the perceived risk of entering into one has fallen dramatically, raising the overall 'risk adjusted return'," Alvin concludes.