Chinese Yuan Against the Indian Rupee - CNY/IND
February 5th, 2007 by Ian
What kind of bizarre trade is this? Some are calling it the new carry trade. Bloomberg has an article describing the upsides and why it is less risky than many think.
Some reasons to take such a trade are the following:
- China Yuan non-deliverable forward has an interest rate priced in at an extremely low .15% (the Japanese Yen is .63%)
- Yuan appreciation already priced in to the forward so low likelihood of getting hurt badly on a revalution
- The positive carry or yield is an astonishing 7.8% return
- Fundamentals in India favor being long rupee
- carry trade diversification and there is potential of unwinding of other carry trades
The problem with it is the availability. These currencies are ones with restriction in place and one can not trade them nearly as freely or in even the same standard methods of trading major currency pairs.
