This data set contains Spot JPY / USD exchange rate as well as monthly US and Japanese
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This data set contains Spot JPYUSD exchange rate as well as monthly US and Japanese interest rates for the period between and
For a starting amount of JPY million, compute your monthly carry trade results. Recall your strategy is to borrow in the currency with low interest rate and invest in the currency with the higher interest rate and compute your yield each month. These are the steps to compute below:
Borrow JPY million at lower interest rate of Japan at monthly frequency
Convert it into USD on spot
Invest at US monthly interest rate
Convert your USD payoff into JPY at the end of the month using the consecutive spot rate
Repay your JPY loan with interest
Compute your monthly percentage yield from your trading strategy
At the end, calculate your average monthly return if you did this for years. Graph your monthly yields over time, when did your strategy work? Why do you think it worked in those times?
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