More and more analysts begin doubting in the carry trade that implies borrowing in the currencies of countries with low interest rates and investing in ones with higher yields. More precisely traders are likely to refuse form the greenback as a funding currency.

According to the index provided by UBS, in 2010 this strategy caused its followers 2.5% loss. It happened as US dollar often used for financing the trades strengthened – the Dollar Index gained 4.5% from its 12-month minimum hit on November 4. Just to compare – in 2008 American currency declined only by 0.98% after the collapse of Lehman Brothers Holdings Inc.

Analysts at Credit Agricole CIB note that the United States seems to be much better than other economies. Apart from the nation’s economic growth dollar will gain upward momentum from rising bond yields and falling demand for the greenback as a funding currency.

Although stronger currency will pose a threat for American exporters, it’s important for US monetary authorities as it encourages foreign investors to buy the debt that finances the country’s $1.3 trillion budget deficit.

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