Foreign exchange - Carry on regardless
The carry trade has been one of the most popular investment strategies over the past year, but there is concern about the potential systemic risks posed by a mass unwinding of these positions. However, some analysts suggest the dangers might not be as great as many suppose. By Mark Pengelly
The carry trade stubbornly refuses to give up the spotlight. Since March, when an appreciating yen sparked fears of a rapid unwinding of carry trade positions and a systemic rout, it has rarely been far from commentators' lips.
The carry trade is "so simple anyone can understand it", says one London-based banker, which may itself be a reason why it has commanded so much recent attention. The strategy involves borrowing in the currency of a country with low interest rates and investing in higher
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