Another carry trade crisis victim — South African rand saw its bad times during the past week. ZAR closed on its lowest rate against Japanese yen (which can be easily called the “favorite” of the week) since the mid September — 15.8549 yens per rand.
Given the 10.5% yield on the overnight interest kept in South African currency and Japanese yen’s 0.5%, ZAR/JPY make a perfect pair to earn nearly 10% a year just on keeping long positions opened. And that’s without adding to account the constant depreciation of yen against its carry trade “partners”.
But as the Japanese yen began to appreciate on this October and global risk aversion started to rise, the attractiveness of ZAR as one of the most risky currencies has fallen greatly. Now its a good chance to earn on the carry trade reversing massive sales of the risky assets; huge potential is lying in ZAR/JPY.
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