One of the biggest casualties of the ongoing global low interest rate environment has been the carry trade, where traders sell a currency with a low interest rate and use the proceeds to buy a currency with a high interest rate. As we know, “high” interest yields have been hard to come by of late, limiting the appeal of carry trades the world over.
So much stuff, so little time. If there is anything good that came from all the distress in the world, Janet Yellen came to the conclusion the Fed can be patient when it comes to raising interest rates.
West Texas Intermediate (WTI) crude oil and the Canadian dollar have been strongly correlated of late, with a 50-day correlation coefficient in excess of 0.8. Therefore, it’s not surprising to see that yesterday’s surpising buildup in oil inventories has driven both oil itself and the loonie to new lows today.