The euro can replace the yen as a currency for carry trade operations, since in Japan they want to raise interest rates, and in the EU, on the contrary, there is a tendency to reduce them. Bloomberg writes about this.
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The decline in European interest rates makes the euro the main candidate for financing sales transactions currency, which increases pressure on that currency.
Carry trade is a financial transaction involving currencies that have different discount rates, and the currency with the lower rate is used for purchase, while the currency with the higher rate is used for investment .
Large American investment companies, such as Goldman Sachs Group Inc. and JPMorgan Chase&Co. recommend borrowing the euro to purchase riskier and higher-yielding currencies.
On January 25, the European Central Bank (ECB) again kept three key rates at the same level: base rate – 4.5%, on the margin credit line – 4.75% , on the deposit line – 4%.
The key rate in the eurozone is expected to decrease by the end of 2024 to 2.5%, compared to 4% in the United States.
