Swiss Franc and Krona Emerge as Carry Trade Alternatives
Carry traders are seeking alternative currencies to finance their trades as the yen's appeal has waned. The Swiss franc and Swedish krona are emerging as prime candidates, according to Russell Investments Ltd and Allianz Global Investors.
The yen's recent surge makes it a less reliable bet for carry traders, who borrow in low-yielding currencies to buy higher-yield assets. For decades, the yen was the currency of choice for sell-side trades, but its appeal is fading as Japan's bond yields rise and joint US-Japanese intervention to support it has underscored a preference for higher Japanese interest rates.
Russell Investments' Van Luu noted that Switzerland is set to keep rates at zero until end-2027, allowing the franc to slide in support of its exporters. This makes the Swiss franc an attractive option for carry traders.