Weekend Economist: Dollar devotion

Traders in Europe are unwilling to accept forecasts of the Australian dollar finishing the year at 90 US cents. That carry trade is still too popular.

I am reaching the end of a two week trip in Europe and the UK visiting central banks; hedge funds and real money managers. Not surprisingly the key theme has been around the record low volatility in markets and concerns that some major shock may be imminent.

Despite those concerns, carry trades have been the dominant theme. In that regard the carry trade of long the Australian dollar short one the euro has been a common theme. Other carry trades around emerging markets are also popular.

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