Safeguarding against carry correction
Background
The carry trade has not only been a major feature of FX markets over the past two to three years, but it has also been, to a large extent, the driving force of the market. Indeed, the success of inflation targeting by central banks, together with the deflationary effects of globalisation, has resulted in a low-inflation, low-interest rate environment, which has in turn generated huge levels of global excess liquidity, driving down financial market volatility.
This market environment has
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