Risk in carry trades: a look at target currencies in Asia and the Pacific

BIS Quarterly Review  |  December 2007  | 
10 December 2007
PDF full text
 (81kb)
 |  10 pages

We analyse carry trades involving the Australian dollar, Indonesian rupiah, Indian rupee, New Zealand dollar and Philippine peso as target currencies. We find evidence supporting the view that downside risk is an important feature of such strategies and propose ways of measuring this risk.

JEL classification: F310, G150, G180, N250.