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Strategy · Macro

CURRENCY CARRY VIA FX FUTURES

NeutralUndefined riskAdvanced

Overview

Long a high-yielding-currency futures contract (BRL, MXN, ZAR) and short a low-yielding-currency futures contract (JPY, CHF). Earn the interest-rate differential while hoping FX is stable.

Setup

  1. 1.Identify two currencies with a yield differential >3%.
  2. 2.Open offsetting positions of equal notional via FX futures.
  3. 3.Verify carry net of margin financing is still attractive.
  4. 4.Set monthly stop based on FX move that wipes out 6 months of carry.
  5. 5.Hold until rate differential narrows or FX vol spikes.
  6. 6.Rebalance quarterly to keep notional aligned.

Max profit

Annualized carry net of fees; 5-12% achievable in normal regimes.

Max loss

Risk-off events can erase years of carry in days; size accordingly.

Breakeven

Carry collected exceeds FX losses.

When to use

In low-volatility regimes when global risk appetite is constructive.

When to avoid

Around major risk events. In currencies with imminent political/economic stress.

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