From RORO to MoRO

First there was carry, then there was risk-on, risk-off (sometimes called RORO) and now we’ve entered a new world order in FX, one which we’ll call MoRO (modified risk-on). Let’s take a look how this regime may work and what it will mean for FX trading. Carry was easy, or as easy as these things get in FX. Between 2000 and 2008, a simple carry strategy (shorting low yielders, long high yielders) would have produced around 4.5% in excess returns. Volatility was also lower vs. the S&P 500. ...